Determining the Correct Service Level Target

There are a few mistakes that are too often made in service level selection. Four key reminders to consider when going through the process are outlined. The first mistake to avoid is confusing the service level with the fill rate. Another common mistake is made when the service level target itself is chosen. Although service levels are often stipulated by management based on intuition, goal setting, or past practices, this selection rarely takes all the relevant information into account, in the correct manner. Another mistake sometimes made is to stipulate a service level without using a mathematical equation, because of a presumption that the shortage cost cannot be accurately estimated. Applying the same service level target to all items is a mistake that is occasionally made.