Definition
Service Level and Fill Rate are two measures of how well you are performing to your customers, or additionally, to your own branches in hub-spoke scenarios.
The more commonly used value of these two is Service Level.
Service Level
Service level is a strict all-or-nothing measure, and calculates the percentage of time you fulfilled an order exactly as requested. If a customer orders 100 units, and you fill 99, you receive a 0 for service level on that order. The logic here is that if they ordered 100, they wanted 100, so you did not satisfy that customer in that instance.
Fill Rate
Fill rate is a more forgiving measure, in that you receive partial credit. It is simply the quantity fulfilled divided by the quantity ordered. In the example above, your fill rate would have been 99/100 = 99%.
Additional Considerations
- For both Fill Rate and Service level, the time component is usually considered as well. It's no good if you deliver the customer's order in full 2 months after they wanted it, so a time range is usually included when service level is measured. It is for this reason that in some systems, service level is abbreviated "OTIF" for "On Time and In Full."
- Special Order items, which will usually be set to a non-stock order policy like Buy To Order or Do Not Order, should not be included in service level calculations. StockIQ does not include non-stock items in SL calculations by default.
- Drop Shipments should also generally not be included in service level calculations.
- Returns should also not be included in your service level calculations, so StockIQ ignores any negative quantity demand records when calculating service level.
Service Level and Fill Rate calculations
In StockIQ, when determining if you satisfied the customer order on time, we first look at if the order had a Required Date, and compare to that. If there is no required date, we look at any Requested Ship Date, and if there is no required ship date, we use whatever value is provided to us as the Demand Date for the order.
There are two methods with which StockIQ can calculate your service level performance, based on the data you have available.
The preferred method is for us to directly calculate your service level by comparing actual shipments (e.g. invoices) to orders. In this way, we can directly see if orders were shipped on-time and in full (or not).
If this data is not available, we can fall back on comparing demand to inventory history and making some assumptions about your performance. If, on a certain day, at the beginning of the day, you had sufficient inventory on hand to satisfy any orders you received on that day, then we presume that you were able to fulfill those orders. If you received more orders on a day than you had inventory to fulfill, then some of those orders can be assumed to have NOT been fulfilled.
This method is of course less accurate than measuring directly, but provides a reasonable fallback for when actual shipment data is unavailable or unreliable.
These settings can be configured in the System Configuration --> Service Level screen.
Variations of Service Level and Fill Rate
It is important to be aware what kind of service level or fill rate you are looking at at any given moment. For example, you can look at line-level values to see how often you were able to completely fulfill each line on a given customer order, but then there is also the notion of an order service level, which is how often you were able to completely fill an order perfectly, and so so in time. Sometimes this is known as your "Perfect Order Percent."
These two types of service level and fill rate are shown in the Vendor Scorecard, for example, to help you understand how well your supplier does on a line-by-line basis, and also on an order-by-order basis.