Customer Service Level

Customer service level in a supply chain is a function of several different performance indices. The first one is the order fill rate, which is the fraction of customer demands that are met from stock. For this fraction of customer orders, there is no need to consider the supplier lead times and the manufacturing lead times. The order fill rate could be with respect to a central warehouse or a field warehouse or stock at any level in the system. Stockout rate is the complement of fill rate and represents the fraction of orders lost due to a stockout. Another measure is the backorder level, which is the number of orders waiting to be filled. To maximize customer service level, one needs to maximize order fill rate, minimize stockout rate, and minimize backorder levels. Another measure is the probability of on-time delivery, which is the fraction of customer orders that are fulfilled on-time, i.e. within the agreed-upon due date.