What Is Fill Rate? Definition and How To Calculate

In a world where customers anticipate rapid delivery of their orders, an efficient fulfillment process is key to the success of e-commerce businesses. In fact, 42% of shoppers expect a two-day shipping option for every online purchase.

So, you can’t afford to experience delivery delays due to inaccurate stock levels or inefficient driver routes. That’s why it’s important to monitor and optimize the order-filling process to improve your fulfillment and delivery speeds. One critical metric to improve is fill rate.

In this article, we’ll explore the concept of fill rate, its significance, and how to calculate it. We’ll explore the different types of fill rates and the factors that impact them. Plus, we’ll answer frequently asked questions about fill rate and its relationship with other supply chain metrics.

By the end of this article, you’ll have a comprehensive understanding of fill rate and its importance in maintaining customer satisfaction and effective inventory management.

What is fill rate?

Fill rate is an essential supply chain metric that gauges the percentage of customer orders your business fulfills entirely and on time — without any back orders or stockouts.

This metric indicates the efficiency of your company’s order fulfillment process and its capacity to meet customer demand.

A high fill rate signifies streamlined operations, effective inventory management, and satisfied customers.

Fill rate formula

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In this formula, fulfilled orders refer to the number of orders completed without issues, while total orders represent the total number of customer orders during a given time period.

By dividing the fulfilled orders by the total orders and multiplying by 100, you get the fill rate as a percentage.

For example, if a business receives 500 orders and fulfills 475 without problems, the fill rate would be (475/500) x 100 = 95%.

<rich-trick>Fill rate calculator<rich-trick>

Fill rate calculator

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What is a good fill rate?

A good fill rate is close to 100%, indicating your business is successfully meeting customer demand without stockouts or back-ordering.

Typical benchmarks for fill rates range between 85% and 95%, with high-performing companies achieving rates exceeding 95%. The average fill rate depends on the industry, but a fill rate above 90% is generally considered satisfactory.

However, you might not want a 100% order fill rate, which could indicate an excess inventory situation. Excess inventory comes with the cost of storage and maintenance, tying up cash flow that your company could use elsewhere.

Aim to balance maintaining a high fill rate and avoiding the pitfalls of excess inventory.

Why is fill rate important?

Fill rate is essential for several reasons, including:

• Customer satisfaction. A high fill rate means your customers receive their orders promptly and completely, contributing to a positive customer experience.
• Increased sales. When you can maintain high fill rate metrics, customers are more likely to place repeat orders, leading to higher sales and customer loyalty.
• Better inventory management. Tracking your company’s fill rate helps you more accurately forecast demand and optimize inventory levels, preventing stockouts and reducing excess inventory.
• Improved supplier relationships. By monitoring fill rates, you can identify supplier performance issues and collaborate to improve delivery times and product availability, supporting efficient supply chain management.
• Competitive advantage. A higher fill rate can provide a competitive edge in the market, as customers tend to favor businesses that consistently fulfill orders promptly and without issues.
• Operational efficiency. Monitoring and optimizing fill rates can improve overall operational efficiency, as it encourages better coordination between various departments, such as procurement, warehouse management, and customer service.

5 types of fill rates

Fill rates can be categorized into several types, including:

1. Order fill rate

Order fill rate measures the percentage of orders a business fulfills entirely without back orders or stockouts.

For example, if a company receives 100 orders and fulfills 95 without issues, the order fill rate is 95%.

Order fill rate is important because it directly impacts customer satisfaction and loyalty. Consistently fulfilling customer orders in full and on time helps build trust and loyalty with your customers, leading to repeat purchases and positive word-of-mouth referrals.

Tacking order fill rate allows you to identify areas for improvement in your supply chain, inventory management, or order fulfillment processes. Improvements in these areas can increase your order fill rate and improve your bottom line.

2. Line fill rate

Line fill rate is the percentage of order line items fulfilled out of all order line items that need to be filled. This metric helps you understand the efficiency of your company’s order fulfillment process.

Order lines refer to the individual items or product types listed in a customer order. Each order line item represents a specific product and its quantity. The line fill rate measures how effectively a business can fulfill each unique item within an order, providing insight into the efficiency of the order fulfillment process.

For instance, suppose a customer orders three different products: a laptop, a mouse, and a keyboard. This order would have three order lines, one for each product. If the business can fulfill and ship the laptop and the mouse but faces a stockout for the keyboard, it’s fulfilled two out of the three order line items.

3. Vendor fill rate

The vendor fill rate is the percentage of vendors who complete order shipments. This metric evaluates the performance of suppliers, distributors, or wholesalers you purchase from and assesses timely product availability.

For example, if a company works with 10 vendors, eight of which deliver orders on time and in full, the vendor fill rate is 80%. A low vendor fill rate may mean that you need to increase inventory to compensate for poor availability from vendors.

4. Warehouse fill rate

Warehouse fill rate is the percentage of orders a warehouse fulfills and ships to customers. This metric helps assess the efficiency of warehouse operations and the order fulfillment process.

For example, if a warehouse receives 1,000 orders and ships 950 without issues, the warehouse fill rate is 95%.

5. Case fill rate

Case fill rate is the percentage of product cases shipped out of all cases ordered. This fill rate calculation is important for understanding the accuracy of order fulfillment at the case level.

For instance, if a company receives orders for 2,000 cases and ships 1,900 cases without problems, the case fill rate is 95%.

Factors that affect fill rate

Several factors can impact fill rate, including:

• Inventory management. Inaccurate inventory levels can make fulfilling orders more challenging, leading to a lower fill rate.
• Demand forecasting. Accurately forecasting demand helps ensure you have the necessary inventory to fulfill your orders, resulting in a higher demand satisfaction rate.
• Vendor performance. If a supplier can’t deliver products on time or has poor product quality, this can negatively affect fill rate.
• Lead time. Longer lead times can result in a lower fill rate, as products may take longer to arrive for order fulfillment.
• Order complexity. Orders with multiple items, customizations, or unique packaging requirements can impact the fill rate, as they may take longer to process and fulfill.
• Seasonal fluctuations. Seasonal demand changes can affect fill rate, as businesses may struggle to maintain adequate inventory levels during peak periods or face excess inventory during off-peak times.
• Warehouse efficiency. The organization and efficiency of warehouse operations—including staff training, automation, and space usage—can influence fill rate, as these factors can impact the speed and accuracy of order fulfillment.
• Order volume. A sudden surge in order volume, such as during promotional events or product launches, can strain resources and affect the fill rate as businesses struggle to fulfill the increased demand.
• External factors. Unforeseen events like natural disasters, global supply chain disruptions, or transportation delays can impact fill rates, as they can hinder the availability of products and the ability to fulfill orders on time.

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FAQ about fill rate

Let’s dive into some common questions about fill rate, including clarifying the fill rate definition.

What is the difference between fill rate and service level?

While both fill rate and service level measure the performance of a business’s order fulfillment process, they focus on different aspects.

Fill rate calculates the percentage of customer orders a business fulfills completely and on time without back orders or stockouts. It indicates the efficiency of a company’s order fulfillment process and its ability to meet customer demand.

On the other hand, several level quantifies the likelihood that a given product will be available when needed to fill orders. As an example, a 95% service level means a 5% chance of having a stockout.

How does fill rate relate to reorder point?

Fill rate relates to reorder point in the context of inventory management and maintaining an optimal level of stock to meet customer demand.

The reorder point is a predetermined inventory level at which a business should place a new order to replenish stock before running out. It helps businesses avoid stockouts and back orders, which can negatively impact fill rate.

A well-calculated reorder point helps ensure you have enough inventory to maintain a high fill rate, satisfying customer expectations for timely and complete order fulfillment. At the same time, the reorder point is set to avoid having too much inventory on hand and causing increased costs.

Consider factors like lead time, average demand, and safety stock levels to determine your reorder point. Safety stock levels refer to the extra inventory kept on hand as a buffer to protect against stockouts, unexpected fluctuations in demand, or disruptions in the supply chain.

By maintaining safety stock, your business can have enough inventory to meet customer orders even when faced with uncertainties or delays in product replenishment.

What are some cost considerations related to a low fill rate?

A low fill rate can have several cost implications for your business, including:

• Lost sales and revenue. When you can’t fulfill orders on time or in full due to stockouts or back orders, customers may cancel their orders or choose not to reorder, leading to lost sales and revenue.
• Increased customer acquisition costs. A low fill rate can lead to dissatisfied customers, who may not return for future purchases. As a result, your business may need to invest more in getting new customers to replace the lost ones.
• Expedited shipping costs. To meet customer expectations and compensate for delays caused by a low fill rate, you might need to use expedited shipping methods, which can increase your shipping costs.
• Higher inventory carrying costs. A low fill rate may indicate inefficient inventory management, which can lead to overstocking of certain items while facing stockouts of others. This imbalance can increase inventory carrying costs, such as storage, insurance, and obsolescence.
• Damage to brand reputation. A low fill rate can harm your business’s reputation, as customers may associate your brand with poor order fulfillment and customer service. This negative perception can make attracting new customers and keeping existing ones more challenging, affecting your business’s bottom line.
• Increased administrative costs. Dealing with the consequences of a low fill rate, such as managing back orders, processing refunds, and addressing customer complaints, can increase administrative costs and strain your customer service team.

How can my business improve its fill rate?

Your business can take several steps to improve its fill rate and enhance order fulfillment efficiency.

• Forecast demand accurately. Implementing better demand forecasting techniques can help your business anticipate future sales and adjust inventory levels, ensuring you have enough stock to fulfill customer orders.
• Manage inventory efficiently. Regularly tracking and analyzing inventory levels and utilizing inventory management software can help your business maintain optimal stock levels and minimize the risk of stockouts or overstocking.
• Strengthen vendor relationships. Building strong relationships with suppliers, regularly evaluating their performance, and implementing a total supply chain management system can help you fulfill timely delivery of products and improve product availability, contributing to a higher fill rate.
• Optimize warehouse operations. Streamlining warehouse processes, investing in automation, and training staff can lead to more efficient order picking, packing, and shipping, resulting in a higher fill rate.
• Monitor lead times. Keeping track of lead times and working with suppliers to reduce them can help you make sure products arrive in time for order fulfillment.
• Maintain safety stock. Holding a buffer of safety stock can help your business account for variability in demand or lead times, minimizing the risk of stockouts and maintaining a high fill rate.

How does fill rate relate to inventory turns?

Inventory turns, or inventory turnover, represent the number of times a business sells and replaces its inventory within a given period. A higher inventory turnover indicates efficient inventory management.

Fill rate measures the percentage of customer orders fulfilled completely and on time. A high fill rate suggests adequate stock levels to meet customer demand.

Both metrics are interconnected, as efficient inventory management, reflected by high inventory turns, can contribute to maintaining a high fill rate, supporting customer satisfaction, and optimizing stock levels.

Fulfill orders on time with help from Upwork

Fill rate is a critical metric for your business to track, as it directly impacts customer satisfaction, inventory management, and overall operational efficiency. By understanding the different types of fill rates and monitoring factors that affect them, you can work toward improving your business’s performance.

If you need assistance optimizing your order processing and inventory management, consider hiring an order processing specialist on Upwork.

An order processing specialist manages and oversees the entire order fulfillment process—from receiving and processing customer orders to coordinating with inventory, shipping, and customer service teams.

With their expertise, you can improve your fill rate, enhance customer satisfaction, and achieve better business results. Get started today by posting a job on Upwork and connecting with skilled professionals ready to help you succeed.

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