Category Archives: Production Operations

Service Levels are fine, but how are they measured? Mike Watson of Northwestern, via Dan Gilmore and Supply Chain Digest, bring this interesting discussion.

I’m reminded of years ago when we installed a system allowing customers to dial an automated speech system that told them where in our system their order was.  It was supposed to reduce phone calls to the salesman followed by phone calls to the factory (this pre-dated universal email!).  The system worked great; but when we talked to customers they said they didn’t use it. Reason: manufacturing had only put in three possible stages– ordered, in process, and delivered! They weren’t disclosing anything in the middle!

One factor Mike is not yet talking about is how to use service levels to coordinate transport suppliers’ activities.  Carriers would be able to work better if they could group customer bundles that require the same service together. There’s no common standard to do that. The closest we come is Amazon’s Prime, which specifies two-day delivery when it is available for a product.  Since virtually all the packages shipped that way are very similar, the standard works well for Amazon, and actually we are seeing convergence on it among other firms sell packages and deliver them.   Package carriers can coordinate on doing the things in their work that assure the two-day deadline is met, and it’s clearly an exception if that does not happen. They’re free to figure out themselves how to do it, and risk losing the business if they can’t maintain a high enough score on the standard.  But it’s hard to generalize this when you have a service subject to large delays, and a very complex carrier and handling network, such as container shipping. My partner Chris Clott of SUNY Maritime and I wrote something on this and presented it at the last IAME meeting in 2016, at Hamburg Germany.

So it is great to see others talking about the many issues in SLAs that need some kind of standardization to provide a coordinating benefit.

White Paper: An Introduction to Service Level in the Supply Chain, Part 1

Source: Supply Chain by Design: Service Level Measures in the Supply Chain