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Stock keeping unit fill rate specification

Author

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  • Teunter, R.H.
  • Syntetos, A.A.
  • Babai, M.Z.

Abstract

The fill rate is the most widely applied service level measure in industry and yet there is minimal advice available on how it should be differentiated on an individual Stock Keeping Unit (SKU) basis given that there is an overall system target service level. The typical approach utilized in practice, and suggested in academic textbooks, is to set the individual service levels equal to the targeted performance required across an entire stock base or a certain class of SKUs (e.g., in ABC classification). In this paper it is argued that this approach is far from optimal and a simple methodology is proposed that is shown (on real life datasets) to be associated with reductions in stock investments. In addition, the new approach is intuitive, very easy to implement and thus highly likely to be positively received by practitioners and software manufacturers.

Suggested Citation

  • Teunter, R.H. & Syntetos, A.A. & Babai, M.Z., 2017. "Stock keeping unit fill rate specification," European Journal of Operational Research, Elsevier, vol. 259(3), pages 917-925.
  • Handle: RePEc:eee:ejores:v:259:y:2017:i:3:p:917-925
    DOI: 10.1016/j.ejor.2016.11.017
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    References listed on IDEAS

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    1. Silver, Edward A. & Bischak, Diane P., 2011. "The exact fill rate in a periodic review base stock system under normally distributed demand," Omega, Elsevier, vol. 39(3), pages 346-349, June.
    2. Wallace J. Hopp & Mark L. Spearman & Rachel Q. Zhang, 1997. "Easily Implementable Inventory Control Policies," Operations Research, INFORMS, vol. 45(3), pages 327-340, June.
    3. Porras, Eric & Dekker, Rommert, 2008. "An inventory control system for spare parts at a refinery: An empirical comparison of different re-order point methods," European Journal of Operational Research, Elsevier, vol. 184(1), pages 101-132, January.
    4. Jing-Sheng Song, 1998. "On the Order Fill Rate in a Multi-Item, Base-Stock Inventory System," Operations Research, INFORMS, vol. 46(6), pages 831-845, December.
    5. Syntetos, A.A. & Babai, M.Z. & Davies, J. & Stephenson, D., 2010. "Forecasting and stock control: A study in a wholesaling context," International Journal of Production Economics, Elsevier, vol. 127(1), pages 103-111, September.
    6. Larsen, C. & Thorstenson, A., 2014. "The order and volume fill rates in inventory control systems," International Journal of Production Economics, Elsevier, vol. 147(PA), pages 13-19.
    7. Guijarro, Ester & Cardós, Manuel & Babiloni, Eugenia, 2012. "On the exact calculation of the fill rate in a periodic review inventory policy under discrete demand patterns," European Journal of Operational Research, Elsevier, vol. 218(2), pages 442-447.
    8. Ulrich W. Thonemann & Alex O. Brown & Warren H. Hausman, 2002. "Easy Quantification of Improved Spare Parts Inventory Policies," Management Science, INFORMS, vol. 48(9), pages 1213-1225, September.
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    More about this item

    Keywords

    Inventory; Service level; Fill rate; Safety stock;

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