Discuss the various measures of product availability
What will be an ideal response?
Answer: Product availability reflects a firm's ability to fill a customer order out of available inventory. A stockout results if a customer order arrives when product is not available. There are several ways to measure product availability. All availability measures are defined on average over a given time frame, which can range from hours to a year.
Product fill rate (fr) is the fraction of product demand that is satisfied from product in inventory. It is equivalent to the probability that product demand is supplied from available inventory.
Order fill rate is the fraction of orders that are filled from available inventory. In a multi-product scenario, an order is filled from inventory only if all products in the order can be supplied from the available inventory. Order fill rates tend to be lower than product fill rates because all products must be in stock for an order to be filled.
Cycle service level (CSL) is the fraction of replenishment cycles that end with all the customer demand being met. A replenishment cycle is the interval between two successive replenishment deliveries. The CSL is equal to the probability of not having a stockout in a replenishment cycle. Observe that a CSL of 60 percent will typically result in a much higher fill rate.
The distinction between product fill rate and order fill rate is not significant in a single product situation. When a firm is selling multiple products, however, this difference may be significant. For example, if most orders include 10 or more different products that are to be shipped, an out-of-stock situation of one product results in the order not being filled from stock. The firm in this case may have a poor order fill rate even though it has good product fill rates. Tracking order fill rates is important when customers place a high value on the entire order being filled simultaneously.
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