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The importance of achieving optimum fill rates in distribution

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The importance of achieving optimum fill rates in distribution

The need to ensure proactive stock level visibility is at the heart of a distribution organisation, allowing you to minimise the risk of becoming Out of Stock (OOS) or at the least to pre-warn your customer so that alternative arrangements can be made without affecting their order pattern. In this survey from the Federation of Wholesale Distributors, this was one of the main issues that customers felt that distributors should help with.  “We normally order two days in advance for the weekend and busy days just to make sure there is enough time to get the stock if a product is missed off the order.”   Fill rates are a core KPI  that measures the ability to fulfil orders from stock as and when they are placed.

Whilst distributors can make great advances in customer service, without this fundamental ability to deliver what a customer needs at the right time, they are less likely to rely on your service again.

What fill rates should distributors be aiming for?

Distributors should be in a position to understand their pareto principle (80:20) for customers, profit and stock.  For the top 20% of products, 90% fill rates should be regarded as the minimum acceptable level, 95% fill rates as better, and 100% fill rates as the ideal.  This in turn, leads to issues around balancing stock and avoiding surplus inventory that does not represent ROI.

We have previously blogged about demand forecasting and how it needn’t be a complex and cumbersome administrative task.

What tools are needed to achieve optimal fill rates?

Accurate knowledge about core products and core customers is essential to effective inventory management.  Microsoft Dynamics ERP and CRM business solutions for distributors help organisations understand and rank customer orders and revenue, matching and analysing order trends and timings to help with planning stock procurement.  Distributors can build up a historical picture to better anticipate seasonal swings in demand and start to set competitive yet realistic SLAs with customers.  Hard information and analysis replaces gut feeling and reliance on personal knowledge.

Speak to Prodware about how to achieve best practice in meeting customer needs, and please download our whitepaper for distribution.

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