What is Service Level?
Service level is a key driver of the amount of working capital (safety stock) in your supply chain. It’s important to set the right amount of safety stock in order to reduce risk, minimize lost sales and increase customer satisfaction. However, it can be challenging to identify the correct service level for each SKU using just rules of thumb, Pareto analysis or ABC classification. While these methods of determining service levels can provide a good start, service level optimization is a more precise way to segment service levels across the supply chain.
Benefits of service level optimization:
- Helps identify the right service level mix in order to meet organization’s business goals including budget constraints
- Provides a better way to set service levels for safety stock optimization in addition to the traditional ABC classification
- Is very easy to set up and drive savings off an safety stock optimization model
Service Level Optimization Software
Using Supply Chain Guru service level optimization software, you can optimize your service level mix for a set of SKUs at a site by setting service levels for each SKU but still achieving the overall service goals for product set at a site. You can work with multiple objectives in mind, including minimize cost, maximize profit or a revenue target. Work within a budget for safety stock target setting by understanding the maximum service levels that can be achieved within your defined budget.