A service level is the success rate of a system. The concept is applied to many parts of an organization. The following are examples of service levels:
- The amount of demand for parts that can be met by the existing inventory level
- The percentage of orders that can be issued within one day of order receipt
- The percentage of customer calls answered within one minute
- The percentage of customer concerns successfully dealt with in the first contact
The concept is frequently used to balance the investment in a system. For example, management might decide that it wants to achieve a 95% call answering rate within one minute. To meet this service level, the call center staff can be reduced from 48 people to 43. As another example, management wants to fill all customer orders within 24 hours of order receipt, which will require an investment of an additional $150,000 in finished goods inventory.