Understanding order fulfillment rates is critical for every e-commerce business owner. It will provide you with vital information, allowing you to forecast the market and make the best possible decision. So, if you're not sure what the order fulfillment rate is or how to calculate it, read on. This is the article for you. Let's figure it out together!
Before diving into order fulfillment rate meaning, let's go over the definition of order fulfillment. Order fulfillment is simply understood as a process that includes receiving orders, handling inventory, picking and packing items, and then shipping them to customers.
The order fulfillment rate (fill rate) is defined by dividing the number of orders already received by the total number of orders handled. It indicates how well the fulfillment service providers handle the shipping process. A higher fulfillment rate can be a competitive advantage for a provider in the market competition. Also, it can point out the bottleneck of the business and facilitate continuous improvement.
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To calculate the order fulfillment rate, divide the number of "delivered" orders in the previous 90 days by the total number of orders and then multiply by 100%.
Expressed mathematically, it is:
Order Fulfillment rate (%) = (Number of orders fulfilled / Total number of orders received) x 100
Note: this calculation excludes "Canceled" orders.
For example, if you've had three orders in the last 90 days and one of them has two titles, the fulfillment calculation will consider it as four volumes. Because three of the four books were dispatched, rejecting one of the two titles in that sequence would increase your rate to 75%.
Some performance calculators will delete "Rejected" orders from calculations automatically. Even if you've only had one "Disapproved" order or reservation in the preceding 90 days, you'll see a 100% completion rate.
The order request is usually sent to the main office as soon as the staff confirms the customer's request. However, because the approval process is still done manually, it might be less seamless and transparent. Sales order confirmations, for example, maybe misplaced or duplicated, resulting in orders being doubled or not received at all.
Not to mention the time it takes for the salesman to return to work. Because the B2B process is more complicated, even a minor hiccup can significantly influence future customer relationships.
Forecasting market demand and developing a purchasing plan are critical tasks in balancing the company's orders. If they run out of stock due to their late arrival, consumers may move to a competitor's service. This will have a negative impact on your firm, as the number of consumer orders is likely to decrease.
As a result, you should anticipate market demand with the greatest accuracy. If you do so, the commodities in your warehouse will be guaranteed in quantity, allowing you to correctly fulfill each customer order.
Because B2B order fulfillment entails shipping in bigger numbers, the order value is significantly higher and frequently necessitates more staff with specialized equipment (pallets, vehicles, etc.). Large organizations may run numerous warehouses (multi-warehouses). These warehouses are occasionally dispersed around the country in order to accommodate the requests of different areas.
However, because the degree of storage in the warehouses varies, the multi-warehouse type will generate issues. Transparent chronological inventory data is essential for a site administrator to be able to assign which warehouses will best fulfill certain client requests. Manually counting inventory, coordinating workers, and processing orders may be difficult and time-consuming. Any delay or inaccuracy on the basis might damage the company's reputation, not to mention the loss of goods or services.
When a client places an order, the company's salesperson will employ a system that combines the submission and receipt of orders. The order quantity and remaining product in the warehouse may be monitored, and the supervisor can also choose the appropriate warehouse location using the same system.
In addition to viewing stock levels and tracking where the product is from anywhere and at any time, the software allows operators and management to automatically update/revise data. As a result, when the products leave the warehouse and are delivered to the customer, the inventory information in the database is always correct. Similarly, if a stock adjustment occurs during goods receipt or stock-taking, the operator can enter it into the system.
Warehouses must store products in an organized manner after production or receipt of goods from the principal. The product must first be received, counted, verified, ID tagged (barcode/QR code), and put into inventory management software or other ERP systems before it can be stored in stock. A cluttered warehouse will result in a variety of issues, including erroneous order placement and order processing delays.
As a result, having a tidy, conveniently accessible warehouse storage system is critical. Keeping a large inventory will improve order fulfillment speed and accuracy.
Distributor software like Distribution Management Systems can identify which items are hot SKUs and other criteria that can help you manage your inventory better. DMS can give managers detailed and real-time stock information. Furthermore, the real-time inventory level provided by this system serves as a guideline for the fulfillment process, including the selection of items to be finished from which warehouse if the distributor delivers the order from various warehouses at the same time.
It is the shipper's responsibility to update the status from the time the item leaves the warehouse until it reaches the delivery point or store location. Managers can use the Delivery Management System application to assign freight carriers to customers and track their status.
Furthermore, the courier may collect digital evidence of delivery, such as a photo document or the consignee's electronic signature for further verification. The shipper can only finish the delivery report in the app if they are already inside the registered client location coordinates, which ensures delivery accuracy.
The purchasing and selling process does not end when the items are delivered to the buyer; goods may have to be returned if they are damaged, expired, or unsold. The product return procedure begins with returning the product, then proceeds to withdrawing from the customer and tracking the condition of the products, all of which are monitored inside the app.
It can be a very intimidating business decision for retailers to outsource inventory and operational responsibilities to a fulfillment partner. Customer satisfaction is a key driver of retail development, so don't put it at risk. Retailers must ensure that their products are sent on time, undamaged, properly, and at the correct price in order to keep customers coming back.
Key performance indicators, shortened as KPIs, are the most effective measurements for holding your fulfillment partner accountable. Businesses use a variety of KPIs to assess operational effectiveness, but each sort of KPI has a varied influence, with some being more important than others. Here are five of the most frequent performance KPIs to consider:
The line fill rate is the percentage of individual item units or product lines from an order that are successfully fulfilled and shipped compared to the total line units ordered. It measures fulfillment performance at the product line level.
Since brands usually list each product as a separate line on orders, this shows the percentage of those lines shipped out compared to total lines ordered. If customers requested 10 lines but only 8 got sent, that's an 80% line fill.
The case fill rate refers to the percentage of wholesale case pack orders that are shipped relative to the total number of case packs ordered. It assesses ability to fulfill full cases ordered primarily in distribution or wholesale channels.
The case fill rate utilized typically in wholesale and distribution. Here brands measure the number of full product cases fulfilled against the total cases ordered. If 10 cases were requested but 1 was out-of-stock, the case fill rate would hit 90%.
The warehouse fill rate calculates the percentage of customer orders that a warehouse successfully fulfills out of its total orders to be shipped. It evaluates the order fulfillment performance and productivity within a warehouse facility.
The warehouse fill rate provides macro-level visibility. It simply compares the orders shipped from a warehouse to the total orders received. Say 300 orders flowed in but warehouse issues meant only 275 deliveries occurred. This warehouse would score a fill rate of 91%.
The order fulfillment rate or fill rate is a key metric for eCommerce businesses, measuring how efficiently orders are processed and shipped. As discussed, a high fulfillment rate depends on streamlined systems, real-time inventory visibility, and fast shipping. However, fulfillment is complex, and scaling order volume often requires help.
By partnering with Efex for hassle-free eCommerce fulfillment, online sellers gain nationwide infrastructure, advanced technology, and logistics expertise to achieve excellent fulfillment rates.
Efex removes the operational burden through integrated, end-to-end services tailored to each merchant's needs. With Efex as their fulfillment partner, eCommerce businesses can focus their energy on sales growth and product innovation while trusted experts handle order processing, inventory management, and fast shipping to delight customers. Leveraging Efex's Hassle-free E-Commerce Fulfillment solution optimizes the fulfillment rate at scale.