A service level is a measure of the ability to deliver goods directly from inventory.
Service level in M3 is defined as the probability that a shortage will not occur during an inventory cycle that is during the period between when inventory is replenished two times in a row.
In M3, the desired service level can be defined per item in a warehouse, which can be used to determine the appropriate size of the safety stock.
In this case, the safety stock is calculated using a safety factor associated with the desired service level. A table containing the relations between specific service levels and safety factors is provided when M3 is delivered. This table is created based on normally distributed Mean Forecast Error.
If another probability distribution will be used as a basis for the functional relation between service level and safety factor, the table values can be modified.
It is also possible to add more service level values and corresponding safety factors in order to create tighter service level intervals.
For information on entering and updating the service level table, see procedure Create Service Level.