Fill rate

How the fill rate is worked out

The sum is what you supplied, divided by what was asked for, multiplied by one hundred. The question is what "what" means, and there are four answers in common use.

Line fill counts order lines shipped complete against order lines received. It is the version the warehouse should watch, because it tracks the work. Order fill counts whole orders where every line shipped, which is much harsher: one missing line out of twenty fails the order. Unit fill counts pieces, and value fill counts money. Each of the four gives a different answer from the same week, and the gap between them is not small.

So state the version on the report. Two teams quoting different fill rates at each other, both correct, is a common and entirely avoidable argument.

There is no good number

A pharmaceutical wholesaler promising next-day delivery on forty thousand lines is running a different business from a furniture importer who orders a container when the orders are in. The first needs a fill rate in the high nineties and pays for it in stock; the second does not measure it at all in any useful way.

The comparison to make is against your own target and your own previous year, broken out by product group. A site figure of 94 per cent usually means the A items are at 99 and a long tail is at 70, and only the second half of that sentence is actionable.

In practice

A distributor receives 10,000 order lines in a week and ships 9,450 of them complete from stock. Line fill is 9,450 divided by 10,000, or 94.5 per cent.

Those 550 short lines were spread across 240 of the week's 2,000 orders, so 1,760 orders shipped complete. Order fill is 88 per cent. Same week, same warehouse, two figures six and a half points apart, both true.

Now look at where the 550 sat. If they are concentrated in a handful of slow-moving items that each sell twice a month, the problem is a reorder point. If they are spread across the top twenty sellers, the problem is forecasting, and no amount of safety stock on the tail will help. The figures here are an illustration.

What moves the figure

• Forecast quality on the fast movers. Most of the shortfall usually comes from a short list of items, and on those the forecast matters more than the buffer.
• The service level you chose. Fill rate cannot exceed what your safety stock was set up to deliver. See service level.
• Supplier reliability, not just supplier lead time. A lead time of three weeks that is sometimes five is harder to buffer than a reliable four.
• Stock accuracy. Stock the system believes in and the shelf does not produces a line that was promised and then fails at the pick face. See stock accuracy.
• Allocation rules. When one channel takes the last units, the other channel's fill rate falls. That is a policy decision, and it should be a conscious one.
• Minimum order quantities. A supplier minimum that does not match your demand profile produces either dead stock or a chronic short on the same item.