Choosing and Achieving a Target Service Level

Thomas R. Willemain

Foresight: The International Journal of Applied Forecasting, 2018, issue 49, 6-10

Abstract: We all understand that accurate forecasts are a necessary ingredient for inventory management; however, the problem remains that if filtered through poor procedures for setting inventory targets, accurate forecasts by no means ensure desired inventory performance. In this feature section, Foresight showcases two articles on the key role of service-level targeting in managing inventories. The service level for an inventory item is the probability that no shortages occur between the times you order more stock of the item and when it arrives on the shelf. In the first article, Tom Willemain describes the primary considerations for setting service-level targets, explaining how software can serve as a valuable aid in this endeavor and offering a case study to illustrate a relatively simple approach-which he calls "service-level wins and losses"-by which a company can evaluate how well it is achieving its service-level goals. The case study also reveals how important it is to utilize appropriate probability models rather than rely on traditional defaults such as the Normal distribution of demands. Copyright International Institute of Forecasters, 2018

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:for:ijafaa:y:2018:i:49:p:6-10

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