This is not a simple subject. But it is yet another project very worthwhile doing right. However, it requires people hanging out on the same deck.
Here is my personal take on the topic: First; I believe in making a difference between MTS and MTO! Why? Because if you are planning for it, you should have it and if you make it to a specific request you should not expect your production planner to have it readily available.
Therefore we call the service level for MTS items a ‘fill rate’. The MTO performance I call ‘Service Level’. It does measure if we can stick to what we promise. Because we can’t fill, we have to promise; after the replenishment lead time.
Now that we know that we have to distinguish we can start figuring out how to measure. For MTS products I would simply say that we take the availability checks result. If it found inventory, all is well; if it failed, the fill rate degrades. How can you measure this? Look at the availability check and if the material availability date is the same as todays date you are good, if not, your fill rate declines.
In an MTO scenario you have to work with the total replenishment lead time. There should not be any inventory. Therefore, your service level is good if you adhere to the result of the availability check (which should tell the customer that they can have the product after that time).
Bottom line: make a difference between MTS and MTO when it comes to service level. Standard SAP doesn’t really have a good report for this. Global Software Inc. out of Raleigh, NC has a cool solution. But more about that later…