measuring service levels in SAP
To measure service with SAP software is not a simple task. Mostly because there really isn’t a standard report, but also because there are so many factors that play a role in the calculation of a service rating and if these are not all lined up correctly and used properly… then it is nearly impossible to correctly determine if the service was ok or not.
One of the most important decisions to take is the MTO versus MTS one. If an item is designated to be replenish by MTS, the customer order (or stock transport order) has to check for stock and incoming receipts, whereas in an MTO scenario the availability check uses the Total Replenishment Lead Time to determine the confirmed date for delivery. If you don’t classify your products by MTO or MTS on a regular basis, you simply can’t set a reasonable confirmation date against which you would measure your service. And that will result in an incorrect report.
Another important feature is whether or not you fix dates and quantities in the delivery proposal. I’ve dealt elaborately with this issue in my video on YouTube http://www.youtube.com/watch?v=TWq_sxJsZ8M&feature=c4-overview&list=UUcNy4oxKL3pwqDNSbN3tvCg and you can see there what happens when you leave the the fixing indicator unchecked and what happens when you do not (broken down into four possibilities for MTO and four for MTS). The video also explains functionality around confirming delivery dates and that leads me to talk about what we should actually measure against…
SAP has created an Add-On tool called the “Service Level Monitor” which measures three KPIs:
– Delivery Service which measures whether or not the requested quantity was delivered in ful on the customer’s requested delivery date
– Delivery Ability which measures if the requested quantity was confirmed on the customer’s requested delivery date
– Delivery Reliability which measures against the confirmed date and shows what proportions was delivered in full to that date.
These measures work for both MTO and MTS since they go after the confirmed dates. The Delivery Ability then measures how good we produced to a forecast and therefore works well for MTS products. In a way you can also derive a measure for forecast accuracy on that KPI.
It should become obvious now that if the MTS versus MTO decision hasn’t been done properly or if the availability check result is not saved correctly, the resulting KPI’s and measures are not very meaningful. It is therefore imperative to fix the process first, before you start measuring the result.
SAP offers Add-On tools that can help you with a number of things that aren’t available in the standard suite. The MRP Monitor helps you calssify your products for a a segmentation by consumption variability, replenishment lead time and more… so that you can periodically check whether your product should be setup for MTS or MTO. It also helps you set that policy in an automated way…
Once all factors are lined up you can use the Service Level Monitor to evaluate your orders by the three KPIs we discussed before:
feel free to contact me to discuss more….