What does "fill rate" refer to in inventory management?

In inventory management, "fill rate" specifically refers to the percentage of customer demand that is met with the existing inventory on hand. This metric is crucial for businesses as it indicates the efficiency of inventory management practices and the ability to meet customer orders without delay. A high fill rate suggests that a company consistently has enough product available to fulfill orders, which can lead to improved customer satisfaction and loyalty.

When a company monitors its fill rate, it can identify gaps in supply or issues in inventory replenishment that could impact sales. By focusing on this metric, organizations can make data-driven decisions to optimize their inventory levels and reduce instances of stockouts or backorders.

The other options do not represent the concept of fill rate. For instance, the speed at which orders are processed relates more to operational efficiency rather than inventory availability. The number of shipments made in a period is a measure of logistics activity, while the amount of safety stock pertains to risk management in inventory, not directly to fill rates.