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