Published in Operations and Supply Chain Terms by MBA Skool Team
What is Order Fill Rate?
Order fill rate is a Percentage of consumption orders satisfied from stock available at a moment. It is also known as demand satisfaction rate.
Order fill rate is a measure of an inventory's ability to meet demand. One needs to keep this order rate as high as possible to avoid delay in production of final product. A higher order fill rate is what is required by a business to function efficiently.
Steps to manage Order Fill Rate
Order fill rate should be kept as high as possible. The following steps can help in tracking and improving the order fill rate:
1. The inventory management should be efficient to see the exact stocks and SKU in hand at all times.
2. The opportunity pipeline should be monitored closely to see how many orders can be expected at what time so that the production capacity can be changed to meet the demand
3. Proper IT systems should be deployed which can give you real time view of the orders and inventory along with a calculated order fill rate which can help you understand the current situation
4. Buffer/Safety stock should also be managed properly to keep inventory ready for the orders.
Importance of Order Fill Rate
Order Fill rate is an important KPI when it comes to proper supply chain and operations management. The most important metric in business are the orders and ability to fulfil these orders. The fill rate tells us how well a business was able to fulfil the orders from the available inventory rather than manufacturing them. This shows that inventory management is in sync with demand and is able to fulfill it as soon as order arrives.
If order fill rate is high, this means we have the right amount of stock or inventory available but if the order fill rate falls to a lower number, this is something which a business needs to sort immediately for a proper distribution system.
Formula of Order Fill Rate
The Order fill rate = Number of orders fulfilled from inventory/Total order received*100
Ideally the number should be 100%.
Hence, this concludes the definition of Order Fill Rate along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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