Service level measures the performance of a system. Certain goals are defined and the service level gives the percentage to which they should be achieved.
* 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 stock out.
Service Level (Inventory Management)
Service level is used in
supply chain managementand in inventory managementto measure the performance of inventory systems.
stochasticconditions it is unavoidable that in some periods the inventory on hand is not sufficient to deliver the complete demandand, as a consequence, that part of the demand is filled only after an inventory-related waiting time. In an inventory optimization model, the amount of late deliveries can be influenced through the introduction of penalty costs (backorder costs) into the objective function. In addition to the optimal parameters of the inventory policyunder consideration, from the optimal solution of such a model also the optimal size of backorders can be derived.Unfortunately, this optimization approach requires that the planner know the optimal value of the backorder 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.
Several definitions of service levels are used in the literature as well as in practice. These may differ not only withrespect to their scope and to the number of considered products but also with respect to the time interval they are related to. These
performance measures are the "Key Performance Indicators" (KPI) of an inventory node which must be regularly monitored. If the controllingof the performance of an inventory node is neglected, the decision maker will not be able to optimize the processes within a supply chain.
α Service Level (Type 1)
The α service level is an event-oriented performance criterion. It measures the
probabilitythat"all" customer orders arriving within a given time interval will be completely delivered from stock on hand, i.e. without delay.
Two versions are discussed in the literature differing with respect to the time interval within which the customers arrive. With reference to a "demand period", α denotes the probability that an arbitrarily arriving customer order will be completely served from stock on hand, i.e. without an inventory-related waiting time (period service level):
In order to determine the safety stock that guarantees a target servicelevel, the stationary probability distribution of the inventory on hand must be known. This version of α is also called "ready rate".
If an "order cycle" is considered as the standard period of reference, then α denotes the probability of no stock-out within an order cycle which is equal to the proportion of all order cycles with no stock-outs (cycle service level):
This second definition, which is often used in operations management textbooks, is based on the idea of not running out of stock during the time between re-ordering and order arrival (the leadtime). That is, the probability of demand during that leadtime being less than or equal to the amount of stock you had left when you ordered. It assumes your reorder point is positive, that orders are in unit increments and inventory is monitored continuously so you can not stock out prior to reordering.
β Service Level (Type 2, also known as "fill rate")
The β service level (fill rate) is a quantity-oriented performance measure describing the
proportionof total demand within a reference period which is delivered withoutdelay from stock on hand:
This is equal to the probability that an arbitrary demand unit is deliveredwithout delay.
Because, contrary to the variations of the service level, the service level does not only reflect the stock-out "event" but also the"amount backordered", it is widely used in industrial practice.
Also, by the definitions, comparing service levels we always have .
γ Service Level
The γ service level, a time- and quantity-related performance criterion, serves to reflect not only the amount of backorders but also the waiting times of the demands backordered. The γ service level is defined as follows:
The γ service level is rarely used in industrial practice.
Further performance indicators
* Duration of a stockout situation
* Customer order waiting time
Service level agreement
* Tempelmeier, Horst, "Inventory Management in Supply Networks", Norderstedt (Books on Demand) 2006, ISBN 3-8334-5373-7
Wikimedia Foundation. 2010.
Look at other dictionaries:
service level — / sɜ:vɪs ˌlev(ə)l/ noun a measurement of how efficient a producer is in distributing goods, e.g. the minimum number of back orders at any one time or delivery frequency to an area ● Service levels must be improved to fight competition. ● The… … Marketing dictionary in english
service level — A comparison between what a customer expects from a service and the actual service received … Big dictionary of business and management
Service-Level-Management — bzw. Dienstgütemanagement ist eine ITIL Prozess Disziplin und dient der Definition, Überwachung und Optimierung von Dienstleistungen in der Informationstechnik (IT). Primäre Zielsetzung dabei ist, dauerhaft die Leistungen der IT (Services)… … Deutsch Wikipedia
Service level agreement — Le Service Level Agreement (SLA) est un document qui définit la qualité de service requise entre un prestataire et un client. Le Service Level Agreement, que l’on pourrait traduire en français par Contrat de niveau de service est donc un contrat… … Wikipédia en Français
Service level objectives — (SLOs) are a key element of a service level agreement (SLA) between a service provider and a customer. SLOs are agreed as a means of measuring the performance of the Service Provider and are outlined as a way of avoiding disputes between the two… … Wikipedia
service level agreement — UK US noun [C] (ABBREVIATION SLA) COMMERCE ► an agreement between a business providing a service and a customer, stating what is being provided, quality levels, etc.: »The center s service level agreement states that 80% of calls will be answered … Financial and business terms
service level specification — the specification (typically scheduled to the project agreement) setting out the standard to which the service must be delivered, often accompanied by an agreed performance monitoring regime that uses KPIs. Practical Law Dictionary. Glossary of… … Law dictionary
Service level agreement — A service level agreement (frequently abbreviated as SLA) is a part of a service contract where the level of service is formally defined. In practice, the term SLA is sometimes used to refer to the contracted delivery time (of the service) or… … Wikipedia
Service Level Agreement — Der Begriff Service Level Agreement (SLA) oder Dienstgütevereinbarung (DGV) bezeichnet einen Vertrag resp. die Schnittstelle zwischen Auftraggeber und Dienstleister für wiederkehrende Dienstleistungen. Ziel ist es, die Kontrollmöglichkeiten für… … Deutsch Wikipedia
Service Level Management — In diesem Artikel oder Abschnitt fehlen folgende wichtige Informationen: OMA Verständlichkeit herstellen, andere Bereiche außer IT belichten Du kannst Wikipedia helfen, indem du sie recherchierst und einfügst. Service … Deutsch Wikipedia