What’s driving your availability levels?
Do you have enough stock to meet demand? Do you have too much? How can you ensure your service level targets satisfy the expectations of the business while still keeping investment in stock under control?
Availability is everything for most businesses. However, while the commercial departments within the business may expect 100% availability, supply chain leaders understand that this is neither an achievable nor beneficial target to aim for. Given the risk of obsolescence and cost of holding inventory, holding excess stock can have a hugely adverse impact on profit margins as well as unnecessarily tying up valuable working capital.
For many businesses, the criteria for setting service levels is often unclear and as a consequence, service level targets are set as a given figure (based on a quick and vague analysis). Furthermore, the quality of the service level is difficult to measure as the effects only emerge after a certain period of time. It is only when an inappropriate service level has a negative impact on safety stock for example, that the service levels are reviewed and quickly adjusted (without any real analysis).
Thus, service levels are not reviewed regularly. Should this worry you? Only if you don't think that service levels are a powerful instrument that have the potential to impact both your profit margins and overall business performance.
Download our latest article on availability and discover how you could overcome these industry challenges:
- Aligning your service level strategy with the overall goals of the business
- Gaining insight into effectiveness of internal processes
- Establishing meaningful service level targets