Service level is
A) the chance of stocking out.
B) the chance of stockpiling.
C) something that should be minimized in retail.
D) calculated as the cost of a shortage divided by (the cost of overage + the cost of shortage) for single- period models.
E) not related to the concept of stocking out.

Question

Quizplus · Accepted Answer

Service level is a probability of meeting demand during a stockout period. It is often calculated as the cost of a shortage divided by (the cost of overage + the cost of shortage) for single-period models. Therefore, D is the correct choice. A is incorrect because service level is actually the probability of NOT stocking out. B is incorrect because stockpiling is not related to service level. C is incorrect because service level is something that should be maximized in retail, not minimized. E is incorrect because service level is closely related to the concept of stocking out.

Service Level Is