What is Service level?
Service level describes the target probability of meeting demand without a stockout. Higher targets usually require more safety stock, so service levels should differ by SKU segment, margin, and customer expectation.
Practical example
A items receive a 98 percent target while 90 percent is more economic for slow-moving C items.
What teams should remember
- Service level describes the target probability of meeting demand without a stockout.
- Higher targets usually require more safety stock, so service levels should differ by SKU segment, margin, and customer expectation.