- Blog Article
Optimizing OEM Success: Proven Strategies to Boost Fill Rates & Elevate Customer Satisfaction
Short Summary:
In this article, you’ll read about:
- The definition of fill rates.
- The direct impact of fill rates on customer satisfaction.
- Using fill rate data to improve inventory efficiency and help cost reduction.
- Fill rates and the role supplier relationships.
- The role of IoT technology in OEM inventory management.
- The importance of a proactive service model for customers.
- Strategies for continuous OEM fill rates improvement.
In the last decade, consumers have grown accustomed to rapid shipping times. Largely thanks to e-commerce platforms like Amazon, shipping speed has become a key component of customer satisfaction across the board. As far back as 2016, 83% of consumers considered “fast shipping” to mean they would receive the product within two days. Today, that number is even higher, with many customers expecting same-day delivery for most transactions.
Although OEMs have a slightly different business model than retailers, the ability to get products and replacement parts to customers when they need them is a leading factor in business success. Even during the supply chain crisis during the COVID-19 pandemic, customers expected delivery timelines to keep pace with the 2-day expectations they had grown accustomed to. That’s not just because of a personal preference to get your stuff earlier, but it’s a must considering that a parts need is usually connected to machine downtime. Which in many businesses can cost thousands of dollars per hour.
In the OEM space, fill rates are the data points that business leaders rely on to get an understanding of how efficiently spare parts are being distributed to customers in need. OEMs provide large and complex machinery, and even if a small part in the machine breaks or needs to be replaced, the uptime of the machine is severely impacted. As the customer waits for after-sales service providers to assess the situation and provide replacement parts, delayed downtime can impact their business and deplete their customer satisfaction levels with their OEM.
The interesting fact is that even if OEM fill rates might seem to be at a very healthy level, customer–facing fill rates are way more often than not suboptimal. That can be due to complex distribution, dealer, or service networks in between. To boost fill rates, organizations must understand the factors that impact fill rates at the customer–facing point, act to improve inventory management strategies, and use advanced technologies to improve forecasting on all fronts.
If supply chain efficiency can reduce pain points in the customer experience, OEMs will notice a boost in brand loyalty and see an improvement in organizational performance. For some people, fill rates may not sound like an indicator of business performance at first, but in an era where convenience and speed are at the top of mind for every consumer, it might just be one of the most critical OEM metrics out there.
Breaking Down Fill Rates
So, it’s clear that OEM fill rates are important, but what exactly is the fill rates metric? For Original Equipment Manufacturers, fill rates showcase the percentage of customer orders that the manufacturer and their customer–facing units successfully fulfill within a given period. Although OEMs may calculate fill rates slightly differently from one another depending on factors like order accuracy, on-time delivery, and the completeness of each shipment, the basic fill rate formula is:
Fill Rate = (Number of Orders Fulfilled / Total Number of Orders Received) * 100
For example, if an after-sales service provider receives 50 orders for replacement parts in a month, but they are only able to send out 40 of the replacement parts, the fill rate calculation will look like this:
Fill Rate = (40/50) *100 OR 80%
A fill rate of 80% is still a bit low; getting as close to 100% as possible is preferred because high fill rates translate to enhanced operational efficiency. High fill rates are always a tradeoff between the desire to fulfill all customer needs and the working capital required to do so. High fill rates also indicate that the dealer has enough inventory on hand to meet customer demands, while low fill rates demonstrate that inventory management is insufficient.
Should OEMs fail to correct problematic fill rates, they risk becoming trapped in a cycle of backorders, potentially causing a decrease in customers. Remember – it’s easy for customers today to find another source for the product they need, they won’t wait for your business just because.
There are way more important formulas you need to know about Fill Rates. For our comprehensive guide on “How to increase Fill Rates for your dealers as an OEM?” click here to download the full version.
The Impact of Fill Rates on Customer Satisfaction
In a business landscape where the quality of machinery and parts is largely equal, OEMs’ competitive edge will shine through their supply chain management strategies and aftersales performance. People don’t like waiting for anything; instant gratification has become the norm, and for OEM customers, that expectation doesn’t waver. The longer end consumers must wait for a replacement part, the longer that team goes without being able to use the costly machinery and equipment it relies on, resulting in bad brand experience and diminished potential for repetitive business in the future.
When OEMs consistently meet customer demand, providing timely and accurate deliveries of products, customer trust and loyalty flourish. On the other hand, low fill rates result in delayed orders, production interruptions, and potentially lost revenue. Customers rely on prompt access to OEM products to maintain their operations and deliver their business commitments. If the need for an after-sales part is impacting business operations, the customer certainly won’t be happy about it. Customer satisfaction for an OEM isn’t just important – it’s everything.
Using Fill Rate Data to Improve Inventory Management and Reduce Costs
For OEMs and dealers, managing parts availability and inventory levels is a challenge as old as time. Keeping excess levels of inventory on hand is costly – inventory takes up space in a warehouse and can become obsolete if held on to for too long. However, not having enough inventory on hand is also costly; since shortages result in costly expedited sourcing or, in the worst-case scenarios, cause customer attrition.
To keep inventory-related costs as minimal as possible, OEMs must find the sweet spot of meeting demand without creating an oversupply. Fill rates and related metrics are the best way to identify that sweet spot, adjust inventory management practices when needed, and keep a finger on customer needs across the board. If monthly fill rates are slipping, leaders can look at the trend and bolster inventory levels moving forward. Fill rates provide critical context for OEM aftermarket service optimization, cost reduction, and inventory management.
The Role of Supplier Relationships
Despite the impact of data analytics and better inventory management strategies on fill rates, one of the best things OEMs can do to hedge against inventory issues is to create strong relationships with their suppliers. Many OEMs receive a large part of their parts from suppliers, which they again sell to consumers or dealers. In a pinch, it’s going to be a lot easier to reach out to a supplier with a rushed request if the supplier trusts your business and enjoys working with you. The importance of human-to-human business relationships doesn’t disappear in the aftersales market, in fact, it becomes even more amplified.
By partnering closely with the suppliers you depend on and sharing data when needed, you can alert your trusted suppliers to upcoming challenges, create a collaborative plan of action to get ahead of those challenges, and work together to provide the best customer experience possible. Although OEM suppliers will likely never speak to OEM customers directly, end–user satisfaction impacts upstream businesses too. It’s in your suppliers’ best interests to come to your aid when needed, but they won’t be willing to if you haven’t invested in fostering supplier relationships.
Leveraging IoT Technology in OEM Inventory Management
Ultimately, fill rates are a data point that allows you to adjust your business operations when needed, but they don’t exist in a silo. OEMs have access to more data than ever before, allowing them to draw conclusions and adapt to customer needs with record speed. Having access to the data is one thing, but knowing what to do with it is an entirely different beast.
With IoT (Internet of Things) capabilities, OEMs can monitor every step of the part delivery process, identify machine components that need to be serviced or replaced, and immediately alert dealers of machine downtime. Improving OEM fill rates with advanced inventory systems can fundamentally change how you and your partner dealers service end users. Staying ten steps ahead of other dealers is possible as long as the right technologies are in place.
Getting Ahead of Customer Needs with Proactive Service Models
Gone are the days when OEM customers call service teams or dealers to alert them of a parts issue; OEMs have all the tools needed to be able to proactively service customer needs. By identifying and correcting equipment issues before they happen, you’ll get rid of machine downtime for your customers, creating an unbeatable level of service. There are many software solutions that offer this functionality, but finding the right one for your business can be a challenge. With a platform like ClearOps, capturing fill rates and other data points is automatic, allowing OEMs and dealers alike to create a proactive service model for better parts availability.
Not only does a proactive service model improve the customer experience, but it can also help OEMs and dealers alike ensure inventory levels are in the right place. With spot-on inventory management, fill rates will always sit right around 100%. The impact of backorders or supply chain issues will be almost nonexistent, and the costs associated with problematic inventory strategies will be a thing of the past.
To be frank, the level of service that end users are accustomed to is impossible to maintain without advanced software solutions and digital tools. Unless warehouse staff and other experts throughout the supply chain are saving time through automation and the reduction of manual tasks, as well as providing proactive service, they won’t meet customer expectations.
The Job is Never Done
To OEM professionals, continuous improvement is a familiar concept. When it comes to fill rates and related metrics, it’s important for organizations to understand that monitoring and adjusting inventory management strategies will never go away. All industries experience fluctuations in demand, supply chain disruptions, and shifting customer preferences.
Regularly assessing fill rates allows companies to identify trends, anticipate challenges, and proactively adjust inventory levels, production schedules, and more. By staying agile and responsive, OEMs can maintain high levels of customer satisfaction, optimize operational efficiency, and remain competitive in dynamic markets.
Prioritize OEM Fill Rates to Stay Ahead of the Curve
For OEMs, high fill rates indicate optimal inventory management, reduce operational costs, and lead to quality customer experiences, but it’s more complex than that. Even if the central OEM warehouse has high fill rates, downstream warehouses, dealers, service facilities, and distributors all need to commit to high fill rate standards to ensure that the customer experience is always positive. If you’re still not sure how to optimize fill rates, or how to help the partners in your supply chain optimize fill rates, start with the following:
- Build strong supplier relationships. The better these relationships are, the more you’ll be able to lean on your suppliers when demand is outpacing your inventory supply.
- Employ inventory management systems and advanced technologies to ensure seamless data alignment with your dealers. Harness the power of IoT devices and connect them to these business systems to create a proactive service model for your customers.
- Closely monitor fill rates and related data trends to adjust inventory levels as needed. Demand is ever-changing, but with a pulse on fill rates, you can get ahead of demand changes before they negatively impact your business.
FAQs
How do shifting consumer preferences and shipping expectations impact OEMs’ fill rate strategies, and what adjustments do they make to stay competitive?
Fluctuations in consumer preferences and shipping expectations directly influence OEMs’ strategies to optimize fill rates by prompting adjustments to meet demands while staying competitive. This entails aligning production and distribution processes closely with evolving consumer needs and delivery expectations.
What challenges do OEMs face in maintaining high fill rates during supply chain disruptions like the COVID-19 pandemic, and how do they tackle them?
Amidst supply chain disruptions such as those seen during the COVID-19 pandemic, OEMs encounter challenges in maintaining high fill rates. These challenges include disruptions to the flow of raw materials, labor shortages, and logistical constraints. To counter these challenges, OEMs implement contingency plans, diversify sourcing strategies, and prioritize essential operations to ensure continuity in their supply chains.
Besides IoT, what other technologies are OEMs using to improve fill rates and customer satisfaction in their supply chain operations?
In addition to leveraging IoT capabilities, OEMs are adopting various technological advancements to enhance fill rates and improve customer satisfaction. These include advanced analytics for demand forecasting, robotics and automation or streamlined production processes, and cloud-based platforms for real-time monitoring and optimization of supply chain activities.
How do OEMs balance high fill rates with managing working capital effectively, especially in industries with fluctuating demand?
OEMs address the trade-offs between high fill rates and working capital by implementing effective inventory management strategies. This may involve adopting just-in-time inventory practices, optimizing production scheduling to minimize excess inventory, and collaborating closely with suppliers to ensure timely delivery of components. Additionally, OEMs may leverage data analytics and demand forecasting tools to align inventory levels with anticipated demand fluctuations, thereby optimizing working capital utilizing while maintaining satisfactory fill rates.
Download The Free Whitepaper “How to Increase Fill Rates”
In the whitepaper you’ll learn:
- Why fill rates are so important?
- What good fill rates look like (with types and examples)
- Order, Value, SKU, OTIF fill rates
- Ways in which low fill rates can influence customer brand perception
- How ClearOps optimizes fill rates for AGCO
- Bridging the gap with RIM solutions
- Increasing fill rates for dealers: Step-by-step plan to implement a RIM Program
- Predicting demand and increasing fill rates with ClearOps
Max Wies
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