A key objective of supply chain management is to maximize customer service while
minimizing relevant costs. Successful supply chain management involves trade-offs,
requiring beverage operations to determine the optimal level of customer
service considering not only the direct cost of lost sales, but also the strategic potential
costs of lost loyalty from consumers or good will from customers. The key is to then
achieve the customer service targets at the lowest operational cost.
There are four well-known and accepted measures of customer service for CPG and
beverage companies:
Service Level (also known as Cycle Service Level)
The Service Level is the percentage of in-stock occurrences against the number
of products ordered.
This is a measure of the probability of having enough inventory to meet all of the
demand arising out of a particular warehouse during a particular planning cycle,
typically a day. A product is considered in-stock if there is sufficient inventory to cover
all demand in a given day. If you have 99 products in-stock and one product out-of-
stock, you would have a 99% service level. Service Level does not measure how many
cases are being stocked-out it only measures the occurrence of stock-outs over a
period of time.


Some operations define a stock-out as an inventory count of zero; conversely an in-stock is defined as a product with an inventory greater than zero. This approach can misrepresent the Service Level because product could have been re-supplied in the time between route load-out (usually in the late-evening) and the inventory count (usually in the early morning). Also, it incorrectly considers a stock-out as having occurred if demand had exactly matched inventory, thus leaving zero on the floor. This scenario is not unlikely for low volume products.

Fill Rate
The Fill Rate is the percentage of cases loaded against the total cases ordered.
For planning purposes, it is the total case count loaded on route trucks divided by the number of cases ordered for the route truck load out over a given period. This is a preferred measure because it provides a better indication of the scale of lost service.
An example illustrating the difference between Fill Rate and Service Level is that you would have the same Service Level regardless of whether you were one case short or ten thousand cases short for a particular product on a load out. The Fill Rate would be much higher if you were one case short than if you were ten thousand cases short.
While Fill Rate is a better measure of lost sales opportunities, it can also be distorted if not properly managed. For example, sales may not have been taking customer orders for products that they knew were already out-of-stock and may have persuaded customers to then order substitute products.


Perfect Load | Perfect Order
Perfect Load measures the percentage of route truck loads that were loaded exactly as specified. This means that every product on a load was present in the correct quantity. A very high Perfect Load percentage is an excellent indicator that an operation is doing a superb job of fulfilling orders.
Along with measuring stock-outs, Perfect Load also measures how well trucks are loaded based on each order. Some beverage operations will even include documents such as delivery slips and customer invoices as part of the Perfect Load criteria.
By contrast from the customer perspective, the complementary metric may be referred to as Perfect Order such that it measures the percentage of orders that met all aspects of expectations from the customer which measures overall quality of the order fulfillment process. A Perfect Load doesn’t necessarily mean it will result in a Perfect Order.


On-Time-In-Full (OTIF)
There is a fourth service measure, On-Time-In-Full, which measures how often customers’ orders are fulfilled completely and within the time window committed to the customer. This means that the original order was satisfied exactly to the customer’s requirements. This metric can have impact on brand reputation such that customers can expect what was requested will arrive as agreed upon. This is particularly important when there are promotions happening downstream such that stock needs to be there to match consumer demand and can result in lost revenue if stock wasn’t available.
As compared to Perfect Load, OTIF has a narrower scope as it is focused on whether or not the delivery was on time and complete whereas Perfect Order also considers condition of goods and accuracy of documentation.

Conclusion
When focusing on planning (and not execution), an often preferred measure is Fill Rate because it is the more direct measure for evaluating the supply chain from the warehouse-product level backward. An often preferred method for measuring planning and execution together is Perfect Order as it incorporates timeliness of delivery which ensuring customer satisfaction to the product received.
Check out how Areté is managing Inventory Planning & Optimization.