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3.4.2 Understanding of Service Level Measures

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Whilst the concept of inventory service is well understood, the same cannot always be said for the details of its measurement. Some managers and planners are well informed but others are not, as observed by Silver et al. (2017, p. 246): ‘…an inventory manager, when queried, may say the company policy is to provide a certain level of service (say 95%) and yet not be able to articulate exactly what is meant by service’.

There are various reasons for this. The measurement of inventory service may appear to be self evident, leading managers to take it for granted, not realising that there are numerous ways of measuring it. Moreover, the measure employed at an aggregate level may not be the same as the measure used at SKU level to determine OUT levels. Again, managers may not appreciate that there is such a difference and assume that it is measured in the same way at all levels. This is just one example of the need for training and development of staff involved in inventory management and demand forecasting. We return to this important issue in the final chapter of the book.

Intermittent Demand Forecasting

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