Fill rate: what it is and why it is important in logistics

The boom in e-commerce has given a boost that is difficult to quantify to sectors such as logistics and transportation. Companies specialized in this activity have a key indicator to assess how effective their service is: the fill rate. 

The fill rate is a term that should be known by all those involved in logistics and transport companies, as well as those who want to develop their professional career in this sector. To begin with, let’s note this acronym, as in articles and manuals we will see references to FR (fill rate) or OFR (Order Fill Rate). 

What is fill rate?

Let’s start by explaining what it is, what it consists of, and how important the fill rate in logistics is:

The fill rate is an indicator used in the logistics sector that collects data on orders delivered on time, within the established deadline, and compares it with the total number of orders received within the supply chain. This index reveals the efficiency and effectiveness of a shipping/transport service. 

This information is considered valuable by many multinational companies, such as Coca-Cola, Amazon, Apple, Dell, or Walmart. They evaluate how many orders reach the customer within the estimated—and ‘promised’—time frame. To check the success rate of the company, it is compared with the total managed shipments, resulting in an index that measures the efficiency or inefficiency of the brand. 

To meet users’ expectations within the established timeframe, one of the aspects most valued by the 21st-century consumer—speed—companies must invest in business intelligence. It is essential to optimize logistics and systems and transportation networks and have qualified professionals who can anticipate events, foresee circumstances, and respond when issues arise.

How to calculate fill rate in logistics?

Thus, the fill rate in logistics is considered an indicator of efficiency for a company operating in the transport sector. Likewise, companies that outsource logistics use this data to assess whether they are meeting both customer needs and their own as contracting parties. 

The fill rate is calculated as follows: 

• Total number of items delivered. 
• Divide the above figure by the number of items requested.
• Finally, multiply the result by 100.

If the result is a high index—for example 85% or 95%—it means the supply chain is efficient. If the result is low, it is a warning sign that there are issues in the company’s logistics and distribution. 

Behind the figure obtained from calculating a company’s fill rate in logistics, there are several aspects to consider, not only the workforce and transport resources:

1. Product availability: It is important that when a user places an order, there is stock available at the time of purchase. This first point is essential. 
2. Purchasing chain operation: From order registration to warehouse dispatch and the preparation of the package, etc. 
3. Shipping of items: With the package ready and the order processed, it is time to load it onto transport to its destination, by land, sea, and/or air. This stage of the chain is essential. Once at destination—whether in another city or country—it involves coordination with local partners and delivery personnel to ensure it reaches the agreed delivery point. 

What is OTIF? 

When addressing aspects related to the term fill rate, another closely related concept in logistics and transport must be discussed: the satisfaction of shipments and receipt of goods. We are referring to ‘On Time In Full’. Yes, OTIF is an indicator that aims to measure deliveries of correct products within the agreed time: On Time refers to punctual delivery; In Full means that, in addition to arriving on the scheduled day and time, the product matches the agreed specifications with the customer. 

Both OTIF and FR are very important metrics in the sector. To improve the distribution system, both must be considered in order to detect issues affecting service quality. 

OTIF vs fill rate: differences

These are similar but not identical concepts. There are certain differences when comparing OTIF vs fill rate. Both allow a company to measure customer satisfaction in relation to order fulfillment. That said, what distinguishes them? What are the differences between fill rate and OTIF?

• FR focuses on the quantity of products delivered correctly.
• OTIF focuses on shipment punctuality and delivery timing. 
• In fill rate, the emphasis is on the number of products delivered within a given period. 
• OTIF focuses especially on whether delivery occurs within the agreed timeframe. 

In conclusion, both concepts are essential in the field of logistics, as they are fundamental to improving service quality and achieving full customer satisfaction. 

Both concepts must be considered whether you plan to pursue a career in this sector or have decided to specialize in other types of business. E-commerce is a perfect example, as it requires strict delivery deadlines and careful handling of shipments to ensure customer satisfaction and loyalty. This is why understanding fill rate and OTIF is so important, among other concepts. That is why specialized training such as the Master’s in Supply Chain Management & Logistics at EAE Barcelona will train you in these and other key concepts for professional practice. 

Professionals with a broader future perspective who wish to lead a company and access senior management must also understand these concepts if they work in activities where logistics and transport are key to success. The Master’s in Project Management provides tools for these technical profiles and includes training in these aspects, among others. 

In a changing job market, it is essential for students to access up-to-date content and receive comprehensive training in everything related to the management and direction of a large organization.