If you want to increase sales (and who doesn’t), you need to increase your initial customer order fill rate. About 50% of the time, when I’m working with direct merchants and I ask, “Are you measuring initial customer order fill rate”, I get the answer “Yes”. But 50% of the time as we talk through it, in reality they are not. What they are measuring is actually the backorder rate or the line item fill rate.
So what is initial customer order fill rate? It is the percentage of orders shipped complete within your fulfillment center’s order fill rate standards. In other words, if a customer’s order has 3 lines on it and you can only initially fill 2 lines, your initial customer order fill rate is zero.
In the definition above I mentioned “within your fulfillment center’s order fill standard”. Currently on average, that order fill rate standard for a fulfillment center is 24 hours (except for weekends where there may not be any warehouse staffing or orders being shipped). Also, to be competitive many centers are shipping more than 50% of their orders same day to cater to the customer’s “point, click and receive” mentality.
So what does initial customer order fill rate show? It shows how well you’re servicing the customer from an inventory perspective. For example, let’s look at the Apparel Initial Order Fill Rate graph featured. Since Holiday peak season is coming, let’s look at the last quarter of the year, weeks 39 to 52. This is an actual order fill rate graph for a customer we have just completed an Inventory Assessment for, and they had never measured their customer order fill rate. Think about this performance from the customer’s experience. The percent of orders shipped complete is between 65% and 80% each week. If you’re the customer, what is the impression of the service you get? Since it’s the major gift giving season, I would submit to you that the customer that experiences the 65% to 80% orders shipped complete is not the company that you as a customer will more than likely do business with again.
Here are some direct merchant industry fill rates to compare.
Initial Order Fill Rate
Customer orders shipped complete
Advanced fashion: 70%-80%
Reorderable, basic apparel: 80%-90%
Gifts/housewares: 85%-95%
Business products: 98%-100%
Final Order Fill Rate
Of the orders taken over the life of a catalog, the percentage of customer orders ultimately shipped 100% complete.
Advanced fashion: 90%-95%
Reorderable, basic apparel: 95%-99%
Gifts/housewares: 96%-100%
Business products: 100%
To return to back to the initial item fill rate and the backorder rates for a minute. Both of these measures generally are 10 percentage points higher than the initial customer order fill rate, because they don’t take into account the partial shipments of customer orders. Or said another way, they don’t look at it from a customer order perspective.
To be far the apparel client has some handicaps:
• 30% to 50% of items are new product, so there is no history by item for new products
• There may be only a single order or one reorder
• Exclusive and imported product are hard to deal with because of the long vendor lead times and higher reorder quantities often by SKU.
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