The service level is a logistics indicator that measures a company's ability to meet the demand of its customers or points of sale, generally the percentage of orders, order lines or quantities delivered without shortage or delay relative to what was ordered.
An indicator with multiple possible scopes
Contrary to what its single name suggests, “service level” actually covers several possible definitions depending on the scope chosen: service level in number of complete orders, satisfied order lines, quantities or value delivered. It can also be measured on the customer side (ability to deliver final demand) or the supplier side (a supplier's ability to deliver what was ordered from them). It is therefore essential to clarify the exact scope before comparing two service levels with each other or against a contractual target.
Service level is directly linked to the safety stock level maintained and to the reliability of sales forecasts: aiming for a higher service level generally means holding more safety stock or improving forecast accuracy, both of which come at a cost. It is one of the core logistics KPIs tracked in a warehouse, alongside inventory turnover, stock cover and OTIF, which it is close to without being identical: OTIF is a combined, stricter definition that requires both on-time delivery and full order compliance.
FAQ
How is service level calculated?
It is generally calculated by dividing the number of orders (or lines, or quantities) delivered in line with the initial demand by the total number of orders expected over a period, with the result expressed as a percentage. The exact scope (orders, lines, value) must always be specified.
Are service level and OTIF the same thing?
Service level refers to a family of indicators whose scope can vary. OTIF (On Time In Full) is a precise, combined definition that requires both on-time delivery and full order compliance, making it a stricter variant.
Related terms
OTIF · Safety stock · Inventory turnover rate · Stock cover · Logistics KPI · Lead time.
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