**Performance Measures for Supply Chain Management**(back to catalog)

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...Suppose we set inventory levels so that on average we maintain a 95% Line Item Fill Rate,^{3} and suppose there are 14 line items on a typical order. Then what is the probability that a typical order will be filled completely, without delay? Looking at our average 95% line item fill rates, if we had only two lines on an order, then the probability the first item is in stock is 95%, and the probability the second item is in stock is also 95%. To fill the total order we need to multiply these probabilities:

**Probability of complete order fill for 2-line order = .95 * .95 = 0.9025 or 90.25%.**

With 14 items we multiply the probabilities for all 14 items:

**Probability of complete order fill for 14-line order = (0.95)**

^{14}= 0.4877 or 48.77%.The probability of complete order fill for a 14-line order is below 50%! The figure below shows the order fill rate corresponding to a 95% line item fill rate, based on the number of items in the order:

**Figure 2: Order Fill Rate**

(Given 95% Line Item Fill Rate)

(Given 95% Line Item Fill Rate)

This figure should convince you that if there are a large number of items on a single customer order, then the chances are good that it won't be filled completely...

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SCM105 Specifications

Rating: 4.3 / 5 (1160 ratings)

Total Reading Time: Approx. 1 - 2 hours (for average readers)

Word Count: Approx. 11,000 words

Author: Dr. Warren H. Hausman

Professor of Management Science & Engineering, Stanford University

Certificate: Counts toward Fundamentals of Supply Chain Management

Datasheet: Download

Contents

- Introduction
- Alignment of Metrics with Business Strategy
- Service Metrics - Build-to-Stock
- Service Metrics - Build-to-Stock (continued)
- Service Metrics - Build-to-Order
- Inventory Metrics
- Speed Metrics
- Financial Metrics
- Bullwhip Metric
- "Bad" Metrics
- Applying Metrics Across the Entire Supply Chain
- Conclusions
- Test Your Knowledge
- Feedback