Manufacturers periodically calculate their fill rate to determine if production is on track to meet all orders with inventory they have in stock.
Fill rate is expressed as a percentage that reflects how often your business has enough inventory on location. The goal is a fill rate of 100%. If it is lower than 100%, it means you need to evaluate how often you order product or whether something else is slowing down production at the other end of the supply chain.
If you’re at less than 100%, you are missing out on sales or waiting around for backordered products.
If fill percentage exceeds 100%, your demand may have decreased or you are simply ordering too much, and you will need to change your reorder point.
The reorder point for each product is the level at which a purchase order is placed to replenish sold product. That level is determined by the fill rate. If you are coming up short, it means you need to have more product on hand to fill orders. You may keep safety stock on hand to cover the time it takes to receive orders from your vendors. But, if demand continues to change, you must periodically update your reorder point levels so your purchase orders are timed to bring in new product to replace product sold. If demand drops back down again, you can update your reorder point to reflect that change.
Demand impacts changes at the customer level, but issues with lead time stem from the vendor. Lead time can also increase when health, economic or political crises impact the travel route from the vendor to your business. Many businesses have experienced this firsthand throughout the pandemic as suppliers overseas struggled to deliver goods on time.
Some businesses sell relatively the same quantities of products year-round and are not as susceptible to stockouts or overages because they are more predictable. But most companies need to keep track of inventory levels regularly so they can quickly adapt before the fluctuations become a problem.
Fill Rate Formula
The fill rate formula is a simple calculation as follows:
Fill Rate = (# Orders Filled/Total # Orders) x 100%
SOS Inventory makes managing inventory levels, order fill rate, and the entire order fulfillment process much easier because all stages of product from raw materials through finished goods are carefully tracked at every stage.
Q: What is warehouse fill rate?
A: The same ratio can be used to calculate how often the warehouse meets its orders on time with inventory on hand. The rate indicates how well the warehouse is being managed.
Q: What is line fill rate?
A: This term refers to the line items on a sales order. If all the line items in the sales orders have been met, then the rate is 100%.
Q: What is case fill rate?
A: The same fill rate formula can be applied to the number of cases in a warehouse. Here, the only difference is you are using the case as a unit instead of an individual product.
Q: What is vendor fill rate?
A: This is helpful information for your receiving department to keep track of the percentage of orders that get delivered. If orders do not show up on time, there may be an issue with the lead time, breakdown in communication from the vendor or perhaps faulty equipment holding up vendor production. Keeping tabs on incoming orders helps to inform managers when to address issues with suppliers.
SOS Inventory provides complete end to end control of inventory so you can monitor fill rate throughout the production cycle and address problems as soon as they arise. Get started today with a no risk, free trial.