Home Fulfillment What is order fulfillment rate? How to calculate it

What is order fulfillment rate? How to calculate it

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What is the order fulfillment rate?

What is the order fulfillment rate?

Consumers’ expectations have risen significantly in recent years.

An effective fulfillment system is essential for the success of any online business in a world in which customers demand their items to arrive quickly. The delivery delays caused by stockouts and backorders should not happen if your online business is expanding.

In order to increase fulfillment and delivery times, the order fulfillment process needs to be carefully controlled and successfully optimized. This is why tracking the order fulfillment rate is crucial for eCommerce companies.

What does Order Fulfillment Rate mean?

Before getting to know the order fulfillment rate definition, take a look at the term “order fulfillment”. Order fulfillment refers to a process in which orders are received, processed, picked, packaged, and shipped to customers.

Simply put, the order fulfillment rate, sometimes referred to as the fill rate, is the ratio of processed orders to total orders received.  This is the percentage of orders you can fill from your supply without experiencing any stockouts, backorders, or lost sales.

Why does the Order Fulfillment Rate matter?

The order fulfillment rate is crucial since it serves as a gauge of your ability to satisfy client demand for your goods. If your fill rate is continuously low or declining, you need to improve inventory management or streamline your fulfillment procedure.

Why does the Order Fulfillment Rate matter?

Why does the Order Fulfillment Rate matter?

Order fulfillment rate is a good indicator of both your capacity to meet demand from customers and the general efficiency of your eCommerce operations. You can use it to determine the demand for different SKUs in your inventory and adjust how you plan your purchases.

Delivering items that meet consumer demand is crucial for business expansion and profit growth. In light of this, management must continually seek the best method for fulfilling orders.

You might run the danger of losing your customers to other suppliers if you repeatedly fall short of their expectations. You must keep your fill rate high if you want to gain your consumers’ loyalty.

Keep track of your order fulfillment rate so that you may evaluate and contrast it with other changes in the business environment in the future.

How to Calculate Order Fulfillment Rate

Here’s the order fulfillment rate formula:

How to calculate order fulfillment rate

How to calculate order fulfillment rate

Let’s consider calculating the order fulfillment rate completed by a system!

The number of orders tagged “Shipped” as well as “Rejected” over the last 90 days is the basis for order fulfillment rate calculation. The total amount of orders, excluding “Canceled” orders, is divided by the number of “Shipped” orders.

“Cancelled” orders are not accounted for in the fulfillment calculation. Orders that have been sent back to the seller are also referred to as “Cancelled” orders.

All orders, including individual titles in orders for several titles that have been canceled due to being out of stock, are counted, whether they are designated as “Shipped” or “Rejected.”

The fulfillment calculation would count that as five books, for instance, if you had 4 orders in the previous 90 days, and one of those orders contained two titles. Because 4 of the 5 books were dispatched, your order fulfillment rate would be 80% if you rejected one of the two titles in that order.

One “Rejected” will also be automatically removed from that computation by the systems. A 100% fulfillment rate should still be visible even if you have had only one “Rejected” during the preceding 90 days.

What is a perfect order fulfillment rate?

Your perfect order fulfillment rate should be as nearly 100% as you can go to a flawless order rate. With this rate, you should be able to complete all orders placed without running into backorders or stockouts. Due to the numerous variables that can affect the fulfillment process, this is essentially impossible.

Businesses usually keep their order fulfillment rate between 85% and 95%. However, you ought to aim for a fill rate of between 97% and 99%.

Limitations on Order Fulfillment

An unfilled order receipt

When a customer confirms an order request with a salesperson, the head office should accept it right away. Nevertheless, since the process is still done manually, the purchase acceptance process often is less noticeable.

For instance, if a sales order slip confirmation is lost or duplicated, orders may be received twice or maybe not at all. Not even to mention the time it takes salespeople to get back to the office. The B2B procedure is more complicated, therefore even a small difficulty can have a significant effect on upcoming customer relationships.

Insufficient supply in case of high demand

Beginning with demand projections for the market and ending with purchasing methods, the company’s order management should always be balanced.

Insufficient supply in case of high demand

Insufficient supply in case of high demand

Due to delays in restocking, a customer who runs out of products may switch to a rival. Your relationships will suffer, and there will be a lower chance of the customer placing another order.

If your prediction is accurate, you can more precisely foresee market demand. If so, your warehouse’s inventory is always secure, allowing you to effectively fulfill all customer orders.

Difficult logistics

B2B order fulfillment entails delivering in bigger numbers, therefore the order value is significantly higher. Additionally, it frequently requires more labor and sophisticated machinery such as trucks, pallets, and so on. Even big businesses occasionally run multiple warehouses.

To fulfill orders in all of their different regions, such multi-warehouses are frequently dispersed. The number of goods in one storage and another facility will differ, which increases the complexity of this multi-warehouse setup.

All warehouses must have real-time data visibility so that the head office administrator can designate which warehouse will fulfill a certain customer order.

Managing orders, labor, and stock manually can be difficult and time-consuming. The credibility of the business can be harmed by any delays and errors that occur on the job, much alone any losses as a result of refunds or returns.

4 Ways to Boost Order Fulfillment Rate

Optimize the ordering operation

The company’s salespeople will employ a system that combines confirming to receiving orders when a customer places an order. Using the same system, the manager may check the size of the order, the quantity of stock still in the warehouse, and the specified warehouse location.

Optimize the ordering operation

Optimize the ordering operation

Using the software, businesses and managers can view inventory levels and track the status of the product anywhere at any time, as well as update and modify data automatically.

As a result, the stock data in the database will constantly be correct when the product leaves the warehouse and is delivered to the customer. The operator can also enter a stock modification if one occurs at the moment of receiving products or taking a stock of the inventory.

Manage inventory in real-time

Following production or delivery from the main, the product must be organized and stored at the warehouse.

Before the product can be stored in the warehouse, it must first be received, counted, inspected, identified (using a barcode or QR code), and entered into an ERP system.

For the order fulfillment process to work well, a well-organized warehouse storage system is crucial. A disorganized warehouse will result in delays and incorrect orders. The speed and precision of order fulfillment will be increased by effective inventory management.

Manage inventory in real-time

Manage inventory in real-time

Hot-selling SKU is one of the words used to describe inventory management. This indicates that these products are the biggest sellers on the market, which explains why they are located in a warehouse nearby the packing station.

Distributor software can help you control your inventory better by identifying hot-selling SKUs as well as other factors. It can give managers thorough and current stock data.

Additionally, if the distributor runs many warehouses concurrently, the stock level that is shown in real-time by this system serves as a guide for selecting which items will be delivered from which warehouse during the order fulfillment process.

Hasten the delivery of products

From the warehouse to the delivery or store outlets, couriers are in charge of notifying the status. Supervisors can use the Distribution Management System program to assign couriers to ship products to customers and track their progress.

Additionally, the courier can gather digital evidence of delivery for depth information, such as photo records or the consignee’s electronic signature.

Furthermore, delivery accuracy is maintained since couriers can only finish the application’s delivery status provided they are already in the location coordinates of the registered buyer.

Process product returns

When things are delivered to the customer, the buying and selling process does not end; occasionally, items need to be returned because they were defective, unused, or over their expiration date.

The software keeps track of the entire product return process, from submitting returns to taking merchandise away from customers to checking on the status of the merchandise.

How to Measure Order Fulfillment Success

Retailers may find it quite unsettling to outsource the inventory and business operations of an organization to a fulfillment partner. Since it is a key factor in growth in the industry, customer experience must never be in risk. Retailers must be confident that their orders will be delivered on time, undamaged, accurately, and at a reasonable cost if they want to keep customers coming back.

Key performance indicators, also known as KPIs, are the best indications of order fulfillment success. Companies employ a variety of KPIs to gauge their operational success, while some are more crucial than others. Here are the top five KPIs to think about in the fulfillment industry:

Costs per Order

This gauges how effectively a fulfillment operation is running. This information reveals the typical cost for you to accept, choose, pack, and ship a single customer order. The productivity of the labor force has a significant impact on this metric.

Accuracy Rate of Order Fulfillment

This gauges how well a fulfillment operation is working. To determine this, simply divide the total order numbers dispatched by the number of orders that were correctly filled.

Inventory Turnover

This gauges the frequency with which your company may sell through all of its stock in a given year. Here’s the calculation to determine inventory turnover: cost of goods sold/average inventory.

Inventory turnover is a crucial sign of the quality as well as the demand of the stock you carry as well as the effectiveness of your purchasing procedures. In general, a higher turnover rate is preferable, whereas a lower turnover rate signals inefficiency and problems converting inventory into profit.

Inventory Accuracy

By counting the things you have on hand and comparing the results to the information in your order management system, you can determine how accurate your inventory is. You must do inventory cycle counts for this KPI.

Return Rate

The rate at which shipping things are returned to you is tracked by the Rate of Return KPI. The key to this statistic is breaking down the causes of returns so you can spot patterns and lower your rate of return ratio by fixing problems at their root.

Final Thoughts

A high order fulfillment rate will result in a better customer experience. Customers will know they have made a good choice in you if you constantly meet their needs.

Keep track of your order fulfillment rate so that you can be more competitive as well as compare with other business trends in the future.

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