Definitions – Priority target measures
The target measures are based on three important dimensions in the term «service level»:
- Quantity – availability
- Time – reliability
- Administration – security
The priority targets measures should be followed and evaluated continuously with focus on level, trends and development.
Target measures Correct quantity – availability
The target measure “Correct quantity” measures availability as precision in quantity delivered.
Definition:
| Number of delivered sales Units | = Availability |
| Quantity of ordered sales Units |
The quantity ordered is the amount that the customer initially ordered.
Not delivered quantity represents deviations in delivery.
Target measure At the right time – reliability
The target measure “At the right time” measure reliability as precision in delivery time.
The target measure is used to measure compliance with time limits defined in the agreement between the parties.
The target measure can be used along several dimensions in the value chain.
Examples may be if orders are sent at the right time, if order confirmations are sent at the right time, if delivery is picked up at the right time, if Despatch Advice is sent at the right time, etc.
Definition (with example order):
| Number of late or early delivery orders | = Reliability |
| Total quantity of orders |
Delayed or premature is determined by whether exchange / delivery is within the agreed time frame.
At Incoterms Ex Works delivery terms, the assessment of the supplier’s reliability is on the supplier’s ramp.
The delivery is received when the order / delivery etc., is acknowledged for.
Target measures Correct Administration – Security
The target measure “Proper Administration” measures security as compliance between what is ordered in the order and what has been delivered and has been invoiced, that is, the correct product without errors and with the correct documentation.
Definition:
| Quantity of orders without credit / debit notes | = SAFETY |
| Total quantity of orders |
Correct administration means that Despatch Advice, shipping notes, invoices etc. are complete and error-free in relation to the delivery.
Only credit and debit notes affecting physical delivery are included in the measurement.
The target measure can also be used to measure the quality of orders from the customer.
Examples of calculation of service level for priority target measures can be found in the document
Service level is measured in %
Target measures Delivery Level Quantity – Availability
If 100 sales units have been ordered and 98 sales units are delivered at first delivery, the service level is 98%.
Target measure At the right time – Reliability
If there are 10 orders placed for delivery at a specific date, the deliveries should have arrived at the specific dates / time slots and 1 of the deliveries arrive before or after the agreed date / time slot, the service level is 90%.
Target measures Correct Administration – Security
Example 1:
Out of 10 orders, 1 invoice has a price error. An invoice for another order contains items reported to the vendor with errors on arrival. The delivery on the third order is missing Despatch Advice.
These 3 errors generate 3 credit notes / deviations and service level is 70%.
Example 2:
Out of 10 orders, 1 of the orders on the invoice has a price error on a product and another item on the same invoice has an error / defect reported to the supplier.
If the errors can be corrected on a single credit note, the service level is 90%.
