How to Improve Service Levels

What is Service Level and How is it Important to My Business?

Service level, as it pertains to inventory management is the percentage of customer orders that you can completely fill with inventory that you have on hand. In reality, this percentage is always less than 100% because the cost of carrying enough inventory to guarantee that you never experience a stock-out would be cost-prohibitive. No matter how much you would like to fill every single order, there are always those situations that arise from time to time where either one or more customers order several times the average weekly sales volume of a particular product and create a back-order situation. Your service level therefore must be balanced with your inventory so that you can attain a reasonable target of fulfilling complete orders while also keeping your inventory levels controlled. Our Kinetic Inventory Management (KIM) software module for osCommerce can help you achieve this balance.

How KIM can help you improve your Service Level

Kinetic Inventory Management (KIM) can help you achieve your desired service level in a couple of ways. The primary way that KIM can help you is by giving you the ability to set a variable called the Maximum Sales Factor, which is a number that you can input on the "Inventory Settings" page of the software. The higher you set this percentage, the more KIM will recommend for you to order to allow for unplanned increases in sales in excess of your calculated average numbers. You can easily change this variable at any time to adjust how rich or lean you would like to run your overall inventory quantities.

The other method that KIM utilizes to help you achieve optimal service levels is by giving you the ability to set the individual lead times for each of your suppliers. The benefit of this feature is that KIM is always adding in the quantity of inventory that is being sold while you are waiting for your next purchase order to arrive. In other words, if your average sales for a given item remained constant and you created purchase orders on a regular schedule equal to your supplier's lead time, you would just be running out of inventory for that item at the time you would be receiving your previous purchase order. This is based on a theoretical situation where your average sales remain fixed, which may not happen that often under real world conditions, but the benefits of this approach can clearly help you fine tune your inventory resources very quickly.