When a supplier ships the wrong product or short ships your order, there is a cost in freight and time to correct the issue. It can also lead to very costly extended downtime for the end user.
For instance, if you order $100,000 in fittings annually and there is a 5% rate of shipping errors, that’s $5,000 of product that needs to be corrected, replaced or sourced from another vendor. As a distributor, consider the impact to your internal procurement management, shipping and receiving costs, plus potential customer downtime. When you add it all up, these costs are far more than the cost of the product. In fact, it’s the customer’s delay in receiving the product and/or downtime that really hurts. They may let you get away with it a couple of times, but eventually they’re going to look for a different vendor.
This is where Brennan’s BI Verify comes in to reduce errors to .01% to save your distributorship time and money-- and most importantly, save your customer relationships.
What’s Your Fill Rate?
Fill rate is the percentage of orders your business can ship today to meet customer demand without creating backorders, missed sales or stock outs. Fill rate is calculated simply by dividing the number of orders shipped by the number of orders placed, multiplied by 100. For example, shipping 90 orders today from the 100 orders received gives a fill rate of 90%.
The average fill rate among most manufacturers and distributors of parts is between 85 and 95%. But that’s really not good enough in today’s world of on demand or just-in-time. Take a very large MRO distributor, mandated by management to hit an average of 98% fill rate on a consistent basis. If they don’t, heads will roll. The problem is, for a long time they weren’t measuring it against returns of wrong items shipped. When you factor in that 5% of items shipped were incorrect, the actual fill rate dropped to 93%. The cost to replace with the correct product, often having to ship next day air, can be astronomical. Plus, there will be significant losses in customer satisfaction-- And heads will roll.
It's obviously not only about shipping as much as possible; it’s also about shipping the right product. Order accuracy is the percentage of orders that are fulfilled and shipped to the customer without mispicking the wrong item or shipping an incorrect quantity. To focus on customer satisfaction, it comes down to:
1. Picking and packing the right items
2. Ensuring they are the correct quantities
3. Shipping all items within 24 hours of order
That’s a true measurement of 100% fill rate. Is it possible to achieve? In truth, not likely. Though the closer you are to 100%, the higher your customer satisfaction.
A reliable business partner needs to have a pulse on certain KPIs to meet customer satisfaction beyond the obvious of offering good products. When it comes to order fulfillment, the primary KPIs are:
1. Fulfillment accuracy
2. Inventory accuracy
3. Speed of order processing
4. Availability of customer order tracking
5. Rate of return
6. Transportation cost (whether if FOB [freight on board] is at the shipping point, where the buyer pays for shipping costs and is responsible for the shipment while in transit, or FOB destination where the seller absorbs the shipping cost and retains ownership of the goods until it reaches the destination)
Bottom Line: Order accuracy, fill rate and reducing errors are all important metrics to track and manage. They impact customer satisfaction and can make or break your relationships.
That’s why Brennan Industries created BI Verify to reduce errors to .01%, saving you time, money and customer relationships.
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