What is order fill rate and why is it important for wholesalers?

Alibaba.com MARCH 15, 202110 MIN READ
What is order fill rate and why is it important for wholesalers?

Inventory and supply can be difficult for wholesalers to get a grip on. This is especially true for industries that typically find success in trendy or fad-related products.

For wholesalers, the inability to fulfill your buyers’ orders can hurt your business, so maintaining a high order fill rate is a must. After all, what is stopping your customers from moving onto another supplier that can consistently meet their needs?

In this post, we’re going to identify what an order fill rate is and why it is important for wholesalers. We’re going to cover how to calculate your fill rate and tips for improving your fill rate.

What is order fill rate?

The order fill rate is the percentage of wholesale orders that are successfully filled. For example, if your customer orders 100 items and 20 of them are out of stock, your fill rate is 80%.

This metric gives you insight into how well managed your inventory is and how effective you are at fulfilling orders. A higher order fill rate is preferable because this means that you hold enough inventory and have a fulfillment process that is effective enough to meet your customers’ needs.

Fill rate has become a major focus for many wholesalers as the market becomes more competitive. If you’re unable to fill your customers’ orders, someone else will. With more wholesalers and suppliers entering the market, this has never been more true.

There is not a magic number for the ideal fill rate as it depends on the nature of your business and your customers.

How to calculate order fill rate

Calculating the fill rate is pretty simple. In fact, you can use the following fill rate formula:

total number of customer orders shipped in full divided by the total number of customer orders placed

This figure is typically presented as a percentage. To turn that number into a percentage, you can multiply that number by 100.

There are two different ways to apply this formula. You can either calculate based on cases or based on line items.

For example, let’s say that your customer places the following order:

  • 40 units of Product A
  • 20 units of Product B
  • 25 units of Product C
  • 15 units of Product D

To keep the example rolling, let’s say you are able to fulfill the request for Products A, B, and C but unable to fulfill the request for Product D.

This means that you can fulfill 3 out of 4 line items which means you have a line count fill rate of 75%. However, you’re only able to fulfill 85 of the 100 requested units, so your case fill rate is 85%.

Why is fill rate important?

The order fill rate is important because it is an indicator of how well you can meet your customers’ demand for your products. If your fill rate is consistently low or dropping, this is a sign that you need to better manage your inventory levels or optimize your fulfillment process

If you consistently fail to meet your customers’ needs, you risk them turning to other suppliers. In order to earn your customers’ loyalty, you’ve got to maintain a high fill rate.

Keep records of your fill rate so that you can refer to them as you compare and analyze other trends in your business.

Fill rate challenges

Another way to improve fill rate performance is to stay aware of some of the challenges that cause low fill rates. Let’s take a look at a few things that might leave you unable to completely fulfill your customers’ orders.

Last-minute buying

Just about any trade situation boils down to the simple concept of supply and demand. In order for there to be favorable rates for all parties involved, there has to be some sense of balance.

Retailers don’t want to have a surplus or deficit of goods. A surplus means that they have invested in inventory that they cannot sell, and a deficit means that their customers are left unhappy. The desire to get it just right causes some retailers to engage in last-minute buying.

Last-minute buying can cause major headaches for wholesalers. If a priority or expedited order comes in for a product that you don’t have stock of, retailers are forced to look elsewhere.

Poor communication

Poor communication causes issues in business. If you are not facilitating clear communication with your customers, it is difficult to understand their needs and their future plans. Without this insight, it can be difficult to prepare for their future orders.

Issues may also arise if you have poor communication internally. Miscommunications about your market’s demand, current inventory, production, and related topics may cause you to miss opportunities to best serve your customers.

Without clear channels of communication, you can shut yourself off from valuable feedback that may help you down the line.

Unpredictable trends

With nearly universal access to social media and the internet, one viral post can create a massive demand for a single product almost overnight.

At the beginning of the COVID-19 pandemic, for example, there was a huge surge in personal protective equipment (PPE). Civilians who wouldn’t typically wear masks or glove suddenly needed them and there wasn’t the supply to meet this need.

This trend was totally unpredictable, but retailers wanted to stock masks. They wanted to stock them fast. Wholesalers that had them ran out very quickly so they were unable to fulfill orders that came in.

Although this pandemic was a freak event, similar trends blow up in many industries. This causes order fill rates to decrease.

7 tips for improving fill rate

To increase your order fill rate, you’ve got to fill more of the orders that you receive. This requires keeping enough stock levels to meet your customers’ needs.

There are a few things that you can do to keep your fill rate high. Let’s explore some of the best practices for improving fill rate.

1. Use a B2B eCommerce marketplace

Using an established B2B eCommerce marketplace can help you improve your fill rate. You can keep track of your inventory and sales that come in, so listings can indicate low inventory levels or unavailability. This way, customers don’t place orders for items that you don’t have available stock of.

Additionally, some B2B platforms have tools that help you take the guesswork out of determining how much inventory to hold. Alibaba.com, for example, offers demand forecasting and industry analytics tools that can help you adequately plan your stock levels.

2. Optimize your fulfillment process

Many wholesalers compromise their fill rates by failing to optimize their fulfillment processes. There are a few ways that you could approach fulfillment optimization.

The first is to use a fulfillment center that is close to your customers. This helps to cut down delivery times. Also, the less distance an order needs to travel, the less likely it is to get lost or have parts separated.

Another way to optimize your order fulfillment process is to take orders online. This helps to improve accuracy because it gives retailers the ability to see exactly what they are ordering and to make their own selections. This is a better alternative to copying down orders over the phone. For large orders, it is wise to reach out to the buyer to confirm their order before it is fulfilled.

Allocating a specific place in your warehouse for order fulfillment is another great idea. Make sure that orders are fulfilled in a dedicated space that is free from distractions. Chaotic workspaces may cause workers to get confused and to make mistakes as they package and address orders.

With these practices, you can do a better job of increasing the likelihood that each shipment is properly fulfilled. Optimizing your processes also can help you cut back the amount of time it takes to fulfil orders, which is a win-win.

3. Hire a specialist

There are a few kinds of specialists that can help you improve your fill rate performance. The first would be a demand specialist.

A demand planner is a person that optimizes the supply chain by assessing customer demands and making inventory decisions accordingly.

Another useful hire would be an inventory specialist. This person would keep track of inventory and work with the demand planner to decide when to invest in more inventory according to trends.

These specialists can be a great addition to your team since they typically come with specific expertise in customer demand forecasting and your specific industry. The advantage of hiring a specialist rather than doing it yourself is that you save time doing the actual research and analysis, and you save time that you’d spend learning how to do these tasks.

4. Listen to the data

In order to keep your fill rate up, you need to listen to the data. Regularly analyze your customer demand so that you know how much inventory to hold. That way, when sizable orders come in, you don’t have to worry about being short on the products that your customers need.

You can access data and reports that are developed by an in-house specialist or you can use dedicated software for both demand planning and inventory management.

Some recommended demand planning software1 options include Infor Demand Planning, Logility Demand, SAP Advanced Planning, Oracle Demand, and Kinaxis Rapid Response.

As for the best inventory management software<2, some suggestions include Fishbowl Inventory Distribution, FOCUS9, Lead Commerce, and WinWeb. These programs provide inventory data to help you keep track of what you have and what you need.

5. Communicate with customers

Maintaining clear communication with your costumes can help you better understand their needs and plan accordingly. Have your account managers touch base with customers regularly over the phone and through email surveys.

These conversations will give you a good idea of the size and frequency of your customers’ orders. It will also keep you in the loop if any of your customers need to place larger orders due to seasonal demand changes or efforts to scale.

By keeping a clear path of communication, you also build some cushion for circumstances that require sharing undesirable news with customers. For example, if there’s a product that is out of stock or on backorder, you can personally let your customer know that there may be a delay with part of their order.

Being upfront with your customer to keep their expectations realistic. This will help to maintain a strong relationship going forward. Additionally, regular communication can go hand-in-hand with good customer service when done right.

6. Offer alternatives

One way that you can improve your fill rate is by having alternatives available for your most popular products. That way, if you’re short on inventory, you can recommend a worthy alternative to take its place.

7. Prepare for seasonal shifts

Demands naturally change throughout the year. The demand for different types of clothing changes as the seasons change. The demand for certain items will also fluctuate around different holidays.

Pay attention to these cycles and adjust your inventory and staff accordingly.

Final thoughts

Keeping your order fill rate up will contribute to a more positive customer experience. By consistently fulfilling your customers’ needs, you show them that they’ve chosen a reliable supplier.

Alibaba.com has the tools that distributors need to take a positive step towards maximizing their order fill rates. Our seller central is equipped with tools for industry analytics and demand forecasting, so you can confidently invest in an inventory that will meet your market’s needs.

In addition to access to these powerful analytics, sellers on Alibaba.com have access to over 14 million users who are ready to buy. This makes it possible to streamline your sales and scale your business.

Create an account today and start reaching B2B buyers on Alibaba.com!

1. https://www.selecthub.com/supply-chain-management/demand-planning-tools/
2. https://www.softwareadvice.com/distribution/inventory-management-software-comparison/