What are some drawbacks of using service level as the only measure of due date performance?

Service level is a performance indicator that measures the percentage of orders that are completed within a specified time frame, usually in relation to the agreed-upon due date. This metric is essential for businesses because it is an indicator of their ability to satisfy customer demands in a timely manner. High service levels show that a company is efficient at managing its supply chain and meeting customer needs.

While service level is a useful indicator of due date performance, relying solely on it may overshadow other critical aspects of performance that should be considered. For instance, service level only evaluates how quickly orders are fulfilled but may not consider the quality of products or the accuracy of the orders. A company may achieve a high service level but still have significant quality or accuracy issues, which can lead to customer dissatisfaction.

Companies might be tempted to manipulate their service level metric to create the appearance of a high-performing operation. They can do this by setting easier-to-achieve due dates or under-promising on delivery times, which can make a high service level easily obtainable. This practice can distort the true picture of the company's performance and fail to address underlying operational issues.

A company's service level may be influenced by external variables beyond its control, such as supplier delays, natural disasters, or regulatory changes. Relying only on a service level metric may not distinguish between issues that are genuinely the company's fault and those caused by external factors, which may impact the accuracy and fairness of evaluating due date performance.

Service level measures the overall percentage of on-time orders but does not consider the differences in priority among customer orders. Some orders may be more urgent or critical to a customer's operation, and failing to meet such high-priority orders could result in significant losses for the customer. A high service level may mask crucial shortcomings in prioritizing and addressing varying customer needs. In conclusion, although service level is an essential performance measure, relying on it as the only indicator of due date performance may be insufficient. Companies should consider multiple performance metrics, including service level, to obtain a holistic understanding of their supply chain performance and ability to deliver quality products on time.