Fill rate, OTIF and backorder rate

Fill rate is the number customers feel most directly: did the thing they ordered leave on the first truck? It sounds like one metric, but it is at least three, and they can differ by 10 points in the same month. On-time in-full (OTIF) and backorder rate add delivery and follow-up to the picture.

The measures at a glance

Measure	Counts a success when	Sensitive to	Typical use
Line fill rate	An order line ships complete on its first shipment	Breadth of stock across many items	Warehouse and purchasing scorecards
Unit fill rate	Each unit ordered ships on the first shipment	Big-quantity lines	Volume and revenue views
Order fill rate	Every line on the order ships complete on its first shipment	Order size (more lines, more chances to miss)	Customer experience
OTIF	The order (or line) arrives complete and inside the agreed window	Stock and transportation together	Retailer and key-account scorecards
Backorder rate	A line (or unit) could not ship and was kept open to ship later	Stock position and backorder policy	Buyer workload, customer service

Every one of these is a ratio, so the definition of the numerator and the denominator decides the answer. Two teams can report "fill rate" from the same data and both be right.

Line fill rate

Line fill rate measures the share of order lines that shipped complete on the first shipment. A line for 10 units that ships 9 counts as a miss.

Line fill rate

Lines shipped complete on first shipment ÷ lines requested

It treats every line the same, whether it is one box of screws or a pallet of pipe. That makes it a good measure of how broadly you are in stock, and the one we reach for first in a distribution business with a long tail of items.

Unit fill rate

Unit fill rate counts units instead of lines. The 9-of-10 line above contributes 9 successes and 1 miss.

Unit fill rate

Units shipped on first shipment ÷ units requested

Unit fill is usually the highest of the three, because a short line still ships most of its units. It is dominated by high-quantity lines, so a few large orders filled well can hide many small misses. Some teams weight by dollars instead of units to get a value fill rate. The same caution applies.

Order fill rate

Order fill rate is the strictest measure. An order counts only if every line on it shipped complete on the first shipment.

Order fill rate

Orders shipped complete on first shipment ÷ orders

It falls as order size grows. If each line independently has a 95% chance of shipping complete, a 10-line order ships complete only about 60% of the time (0.95 to the 10th power). Order fill is the closest to what a customer experiences, and the hardest number to move.

Worked example

With invented round numbers, suppose that in one month a branch received 200 orders containing 1,000 lines and 20,000 units. On the first shipment, 950 lines shipped complete, 19,400 units shipped and 170 orders shipped with every line complete.

Measure	Calculation	Result
Line fill rate	950 ÷ 1,000	95.0%
Unit fill rate	19,400 ÷ 20,000	97.0%
Order fill rate	170 ÷ 200	85.0%

The same month and warehouse give three answers spread over 12 points. That spread is normal, so a fill rate number needs its definition next to it.

Calculator

Fill rates

Order lines requestedLines shipped complete on first shipmentUnits requestedUnits shipped on first shipmentOrdersOrders shipped complete on first shipment

Line, unit and order fill measure different things. Always say which one a number is.

On time and in full (OTIF)

OTIF counts an order (or line) as a success only when it is both complete and delivered inside the agreed window. It combines a stock question (did we have it) with an execution question (did it get there when promised).

OTIF

Orders delivered complete and inside the agreed window ÷ orders

In the same invented example, 160 of the 170 orders that shipped complete arrived inside the delivery window. OTIF is 160 ÷ 200, or 80.0%. OTIF can never be higher than the in-full rate alone, and it is usually lower.

ASCM's SCOR Digital Standard places a broader measure, perfect order fulfillment, at the top of its reliability attribute. In paraphrase, a perfect order is one delivered in full, on the date committed, with accurate documentation and in good condition. OTIF is the first two of those four tests.

Why OTIF definitions differ between trading partners

OTIF is not a single standard. Large retailers and key accounts publish their own supplier requirements, and the details change the number a great deal. Settle these questions with each partner.

Question	Common variations
On time against which date?	Requested date, first promised date or the latest agreed date
Measured where?	Shipped from your dock, or arrived at their dock
How wide is the window?	Exact day, a day either side or an appointment slot
Is early a miss?	Many retailers count early arrival as not on time
In full at what level?	Order, line or units (case count), sometimes with a tolerance
Who owns carrier delay?	Depends on whether you or the customer arranged freight

We keep one internal OTIF definition for our own management and calculate each partner's version separately to match their scorecard. Trying to force one number to serve both usually means neither is trusted.

Note

When a customer shares their OTIF scorecard, reconcile a sample of their misses to your own shipment records before arguing about the total. Most disputes come down to a different date or a different unit of measure.

Backorder rate

Backorder rate measures the share of lines (or units) that could not ship and were kept open to ship later.

Backorder rate (lines)

Lines placed on backorder ÷ lines requested

In the example, if every one of the 50 short lines went to backorder, the line backorder rate is 50 ÷ 1,000, or 5.0%, the mirror image of line fill. The two do not always add to 100%, because some short lines are cancelled or substituted instead of backordered. A rising backorder rate with a steady fill rate often means customer service has stopped offering alternatives.

First shipment versus eventual fill

The formulas above all use the first shipment rule: a line counts as filled only if it shipped complete the first time. The alternative, eventual fill, counts a line as filled once all of it has shipped, however many shipments that took.

Eventual fill almost always looks better, and it measures something real (you did eventually deliver). But it hides the cost of the second shipment, the extra freight and the customer who waited. We report fill on the first-shipment rule and track time to fill backorders as a separate measure.

What distorts the numbers

Order handling habits change fill rates without any change in stock. Decide how each case counts before you build the report.

Situation	What goes wrong	A reasonable rule
Substitutions	The line ships a different item, so it may count as a miss, or as a hit that hides the stockout	Count as filled for the customer measure, but log it as a stockout of the original item for purchasing
Customer-requested partials	The customer asked for part now and the rest later, so the short first shipment looks like a miss	Measure against what the customer asked to ship on that date, not the total ordered
Drop-ship lines	The supplier ships, so your stock was never involved	Exclude from warehouse fill, report supplier fill separately
Future-dated lines	Lines not due yet appear open and unshipped	Count lines in the period they were due to ship, not the period they were entered
Cancelled lines	A line cancelled because you had no stock disappears	Keep stock-driven cancellations in the denominator as misses
Unit of measure changes	Ordered in cases, shipped in eaches, so unit counts disagree	Convert to one base unit before calculating unit fill

Your ERP holds the order, shipment and date fields these rules need. The work is in agreeing the rules and applying them the same way every month.

Fill rate versus cycle service level

Fill rate and cycle service level are both called "service level," but they measure different things. Mixing them up is one of the most common errors in inventory planning.

	Cycle service level (CSL)	Fill rate
Question it answers	In what share of replenishment cycles do we avoid running out at all?	What share of demand do we ship from stock?
A cycle with one unit short	Counts as a complete failure	Counts as a small miss
Where it is used	Setting safety stock with a z value	Reporting to customers and managers
Depends on order quantity?	No	Yes, larger orders mean fewer cycles and fewer chances to run short

Safety stock formulas are built on cycle service level: choosing 95% means you expect to avoid a stockout in 95 of every 100 replenishment cycles, using the normal distribution (see the NIST/SEMATECH e-Handbook linked below). They say nothing directly about how many units you will be short when a stockout does happen.

With invented numbers, you can see how the two diverge. Suppose demand over the lead time has a standard deviation of 40 units and you set safety stock for a 90% cycle service level. Under the usual normal assumption, the expected shortage in a cycle works out to about 1.9 units. If you reorder 400 units at a time, that is a unit fill rate of about 99.5%. If you reorder only 100 units at a time, you face the same risk four times as often, and unit fill drops to about 98.1%.

So a 90% cycle service level can deliver a fill rate well above 95%, and the gap depends on order quantity. If customers and managers judge you on fill rate, setting safety stock as if the target were a cycle service level usually overstocks. Planning texts such as Silver, Pyke and Thomas cover the method for solving safety stock directly for a fill-rate target.

Caution

Do not type a customer's fill-rate target into a safety stock calculator that asks for a cycle service level. The two numbers are on different scales.

Setting up service reporting

1. Pick one primary fill measure for internal reporting (we suggest line fill on the first-shipment rule) and write the definition on the report.
2. Decide how substitutions, customer-requested partials, drop-ship, future-dated and cancelled lines count, and apply those rules every month.
3. Build each key customer's OTIF to their published definition, separately from your own.
4. When you set safety stock, be explicit about whether the target is a cycle service level or a fill rate. The next page, Safety stock, reorder point and EOQ, shows how.