CPIM Practice Exam

What is the customer service level formula designed to measure?

1. The percentage of orders delivered on time

2. The balance between stockout chances and orders per period

3. The average inventory turnover rate

4. The total number of customer complaints

The correct answer is: The balance between stockout chances and orders per period

The customer service level formula is primarily designed to measure the balance between stockout chances and orders per period. This concept emphasizes the importance of maintaining sufficient inventory levels to meet customer demand without overstocking, which can lead to increased carrying costs. By evaluating the relationship between how often stockouts occur (which can negatively affect customer satisfaction) and the volume of orders received, organizations can better gauge their performance in fulfilling customer needs while managing inventory effectively. This balance is crucial for businesses striving for optimal service levels, as it helps in identifying trends in demand and adjusting inventory policies accordingly to ensure that customer expectations are consistently met. Other options, while relevant to customer service and inventory management, do not encapsulate the broader purpose of the customer service level formula in the same way.