When it comes to running a DTC brand, having product in stock for your customers to purchase is paramount. Of course, situations may arise where you find that you have to place items on backorder, but this isn’t ideal—especially if it could have been avoided. In a world where purchasing behavior is often unpredictable and the customer’s experience can make or break your opportunity to gain a repeat customer, your order fulfillment process should be optimized for speed, accuracy, and efficiency. This is why fill rate is a metric that all ecommerce businesses should pay attention to.
Fill rate, sometimes referred to as order fulfillment rate or demand satisfaction rate, is the percentage of orders that you can immediately ship from your available stock without taking backorders or missing a sale. Essentially, fill rate can be considered a reflection of the effectiveness of your ecommerce operations. If you’re able to meet customer demand for your product without any hiccups, you’re on the right track.
Fill rate is also a component of your inventory management process—helping you to understand which products are selling out or selling quickly so you can plan your manufacturing and procurement accordingly.
Fill rate is an important indicator of customer satisfaction, as it measures how quickly customers can expect to receive purchases from a business.
Fill rate is an important metric to track for your business because it tells you how productive, efficient, and quick your teams (or your 3PL’s team) are able to process customer orders and ship them out. Because of this, companies typically aim for a fill rate of 100%, or as close to it as possible.
A high fill rate means your business is able to meet customer demand, fulfill orders quickly, and by nature, achieve high positive customer satisfaction. Beyond this, there are some additional reasons why fill rate is an important metric to evaluate:
When your company is able to achieve a high order fill rate, it signifies that your company can be trusted in the marketplace. When customers are satisfied with your product and its delivery, they’re able to rely on their products arriving on time—increasing loyalty and likelihood to recommend. First-time customers will be judging your fulfillment with a critical eye. If you’re able to win their business the positive experience may keep them coming back.
If your fill rate is low, then you’re only shipping a portion of the orders that your customers make. This means you’ve left money on the table and opened the door for customers to go to competitors who have product in stock. With fill rate information at your disposal, you’ll always be keenly aware of missed opportunities and on the right track to remedy them.
The quickest way to save on your bottom line is to reduce operational inefficiency. Tracking order, warehouse, case, and vendor fill rates all have a role to play in how your company determines the effectiveness of your supply chain processes. (Read on to learn more about the types of fill rates in the next section.) Measuring your fill rate and understanding its impact allows you to pinpoint areas of your distribution that may need to be addressed.
The most common fill rate that companies measure is order fill rate, however, there are various other types of fill rate that can provide valuable insight. When it comes to the efficiency of your supply chain, you don’t want to skimp on accuracy.
Here are the various types of fill rate:
The formula for calculating fill rate isn’t overcomplicated. In order to arrive at your fill rate, you must divide the number of customer orders shipped in full by the total number of customer orders placed. When you multiply that number by 100, you’ll uncover your fill rate (in percent).
(Total Number of Customer Orders Shipped / Number of Customer Orders Placed) * 100
In order to calculate fill rate, you’ll first need to collect the information required to fill in the fill rate formula.
Here’s a step-by-step process for calculating fill rate:
In order to use the formula above, you’ll need to first determine the time frame for which you want to measure the fill rate. You can measure fill rate on a weekly, monthly, quarterly, or even yearly basis. Each calculation has its benefits, but what’s important to consider is what you’re trying to measure. Perhaps you want to see which months of the year you’re most efficient and which you’re not. In this case, you’ll want to calculate the fill rate on a monthly basis.
Once you’ve decided on the time frame you’re measuring, you’ll need to figure out how many orders were shipped to customers during that time. Let’s say you shipped 150 orders over the course of February. Your formula would look like this:
(150 Customer Orders Shipped / Number of Customer Orders Placed) * 100
Now, you must continue to fill in your formula with the total number of orders placed. Continuing with our example, let’s assume customers placed a total of 185 orders during February. This means that the fill rate is the percentage of completed orders out of the total 185 orders placed. Your formula should now look like this:
(150 Customer Orders Shipped / 185 Customer Orders Placed) * 100
(0.81) * 100
To get the final fill rate value, you’ll need to multiply the decimal you arrived at in the previous step by 100 to convert it to a percentage. Your completed formula should read like this:
Fill rate = (0.81) * 100 = 81.1% (rounded up to the nearest tenth)
Remember, the closer your fill rate is to 100%, the higher your customer satisfaction rate will be too.
Improving your order fill rate really boils down to how streamlined your order fulfillment process is. While there are ways to improve processes on your own, sometimes your best bet is to outsource fulfillment to a company like Airhouse. Here are three areas to focus on to improve order fill rate:
The fastest way to improve your processes is by partnering with a tech-forward company like Airhouse. With powerful fulfillment software and services that integrate with your ecommerce store (like Shopify), Airhouse enables you to automate your ecommerce fulfillment processes while giving you better visibility into the status of every order.
As orders come in through Shopify, they’re immediately processed into the Airhouse dashboard where you can keep a pulse on the status of every order. From processing, to picking and packing, to delivery, you’ll never be left in the dark. Not to mention, with our real-time dashboard, you can calculate fill rate down to the minute.
With Airhouse, there’s no need to investing in multiple point solutions for your fulfillment needs. Our all-in-one platform also provides real-time inventory management capabilities—providing you full visibility into your inventory levels. This means you’re always avle to know when SKUs are running low and when you need to reorder.
As we mentioned earlier, getting products to your customers quickly and efficiently is of the utmost importance if you want to improve your fill rate. With Airhouse, we’ve already negotiated deals with freight operators and shipping carriers, so you don’t have to. This means you get the best delivery services at a fraction of the cost that would be accessible to your business on its own.
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