What is service level in SAP (PP-MRP - Material Requirements Planning)?

SAP Term: service level

• Component: PP-MRP

• Component Name: Material Requirements Planning

• Description: A percentage indicating the proportion of required quantities of materials covered by stock on hand in the warehouse or stores. Between 90% and 95% is sufficient because a higher service level results in a disproportionate increase in storage costs. The service level is used by the system to calculate the safety stock.

Smart SAP Assistant

• Key Concepts: 
  Service level is a term used in SAP's Material Requirements Planning (MRP) component. It is a measure of the amount of inventory that must be kept on hand to meet customer demand. The service level is calculated by taking the total demand for a product over a certain period of time and dividing it by the total supply available during that same period. The result is expressed as a percentage. 
  
  How to use it: 
  In SAP's MRP component, the service level can be used to determine how much inventory should be kept on hand in order to meet customer demand. This can be done by setting a target service level and then adjusting the inventory levels accordingly. The target service level should be set based on the customer's needs and the company's goals. 
  
  Tips & Tricks: 
  When setting a target service level, it is important to consider the cost of carrying inventory as well as the cost of lost sales due to stockouts. It is also important to consider any seasonal fluctuations in demand that may affect the service level. 
  
  Related Information: 
  The service level is closely related to other concepts such as safety stock, reorder point, and lead time. Safety stock is the amount of inventory that must be kept on hand in order to ensure that customer demand can be met even if there are unexpected delays in supply. Reorder point is the point at which new orders must be placed in order to maintain the desired service level. Lead time is the amount of time it takes for an order to arrive after it has been placed.