Service level
The service level is the target specified by the management it defines the performance objectives, which the inventory function must be capable of achieving. The service level can be defined in terms of an order cycle time, case fill rate fill rate order fill rate, or any combination of these.
- The order cycle time (performance cycle) is the elapsed time between the release of a purchase order by a customer and the receipt of the corresponding shipment.
- A case fill rate defines the percentage of cases or units ordered that can be shipped as requested. For example a 95 percent case fill rate indicates that, on an average 95 cases out of 100 could be filled from available stock. The remaining 5 cases would be back-ordered or deleted.
- A line fill rate is the percentage of order lines that could be filled completely. Each line on an order is a request for an individual product, so an order may have multiple lines. For example, when a customer order is received for 80 units of product A and 20 units of product B, the order contains 100 cases and 2 lines. If there are only 75 units of product A available and all 20 units of product B, the case fill would be 95 percent [(75 + 20) / (80 + 20)] and the line fill would be 50 percent (1/2).
- Order fill rate is the percentage of customer orders that could be filled completely. In the above example, the order could not be completely filled. So the resulting order fill would be zero.
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