Fill Rate: What It Is and Why You Should Care
It’s important to have impartial methods to measure success in wholesale sales. In our new series on wholesale metrics, we'll cover the most critical metrics you should consider when evaluating the performance of your business. For wholesalers, one of the most salient metrics is fill rate. Fill rate is essential to the order management process and is inherently customer-centric. It's the percent of your orders that are shipped in full and on time on the first shipment as a percentage of all of your orders - in other words, the likelihood that you will accurately service your customers. Fill rate is incredibly important because it has a significant impact on your relationship with your retailers. It affects whether they trust you and whether they choose to order from you over your competitors. You should be shooting for 100%. Other important metrics include visit to order time, order throughput time, inventory turn and order to cash. We'll be covering more of these wholesale metrics in posts coming soon. Since fill rate is about getting the customer what they want in a timely fashion, fill rate can affect many of the other metrics used to measure wholesale sales success, for example, order to cash. The cash isn’t coming until the retailer receives the order.
Understanding Fill Rate
Knowing inventory helps improve your fill rate
Wholesalers who have a real-time understanding of inventory available for shipping hold an advantage over wholesalers who do not. Since they can see which items are out of stock or will ship late, they can make decisions in consultation with the retailer whether to substitute product or wait for it. This helps wholesalers: Manage retailer expectations No customer wants a shock that leaves a hole on the shelves. If the product is shipping after the initial order but within a few days, that may affect the alternative action the retailer wants to take. For example, the retailer may wait for the remainder of the order instead of ordering a different product to add to the mix. For a longer wait, they may switch the order for product that is available immediately. Offer alternatives Sometimes retailers can’t wait and want an immediate alternative to product that is currently unavailable or shipping late. Keep the shelf space full Shelf space is expensive. Retailers want to have something that can turn quickly and turn them a profit. They also need to be able to rely on you based on their assortment planning goals. If they can't, they are less likely to place an order with you in the future. Avoid another sales cycle Retailers don’t want to go through another sales cycle. If the product can’t ship, they don’t want the wait or the hassle of having to re-order. For the wholesaler, it means fixing the order at the time of its placement, saving the time of reconfiguring the order later with available product. Increase rep productivity Without inventory visibility, reps can inadvertently sell products that are unavailable. Once the order is processed, they are often the ones to deal with the aftermath of partially filled orders, taking precious time away from selling.
The ideal fill rate
Chances are that you have a decent qualitative sense for your fill rate front based on feedback from your retailers. If you're in trouble on the fill rate front, you have likely already seen the impact on your customer retention. However, your analysis of fill rate can't stop there. If you haven't done a deeper, quantitative analysis of your fill rate, you need to make this a priority. According to a report by the Tompkins Supply Chain consortium, leaders in fill rate are exceeding 98%, and the average hovers just under 95%.
How to improve your fill rate
Once you assess your company's fill rate performance, it's time to identify your opportunities for improvement. We've seen access to inventory data make a significant impact on a brand's ability to more accurately ship an order. Whether it's using sales order management software that has an inventory level feature or a more manual approach that keeps your reps informed of inventory data, focus on empowering your reps with the information they need to ship accurate and complete orders, and improve the customer experience. Have you experienced improvements in your fill rate by pulling additional levers? Share with us in the comments below.