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Service level measures the performance of a system, service or supply. Certain goals are defined and the service level gives the percentage to which those goals should be achieved.
Examples of service level:
- Percentage of calls answered in a call center
- Percentage of customers waiting less than a given fixed time
- Percentage of customers that do not experience a stockout
- Percentage of all parts of an order being fulfilled completely
- Use of a safety stock to ensure that a target percentage of orders can be met in full and on time.[1]
The term "service level" is used in supply-chain management and in inventory management to measure the performance of inventory replenishment policies.[1] Under consideration, from the optimal solution of such a model also the optimal size of back orders can be derived. A back order is an order placed for an item which is out-of-stock and awaiting fulfillment.[2] Unfortunately, this optimization approach requires that the planner knows the optimal value of the back order costs. As these costs are difficult to quantify in practice, the logistical performance of an inventory node in a supply network is measured with the help of technical performance measures. The target values of these measures are set by the decision maker.
- ^ a b Aberdeen Group, Are Your Inventory Management Practices Outdated?, published on 1 March 2005, accessed on 14 July 2024
- ^ Kenton, W., Backorder: Definition, Causes, Example, Vs. Out-of-Stock, updated on 26 December 2022, accessed on 9 February 2024