What does service level measure in the context of inventory?

Service level in the context of inventory refers to the percentage of customer demand that can be fulfilled from available stock without experiencing stockouts. It is a critical metric because it directly relates to customer satisfaction and the ability of a business to meet its operational goals. A high service level indicates that a company is effectively managing its inventory to ensure that products are in stock and available when customers need them.

This metric is essential for balancing between having too much inventory (which ties up capital and storage costs) and having too little (which can lead to lost sales and unhappy customers). The service level captures how reliably a business can meet customer demand, thus providing insight into inventory management efficiency.

The other options discuss different aspects of inventory management. For example, average turnover rate relates to how often inventory is sold and replaced over a period, while accuracy of inventory counts deals with the precision of inventory records. Time taken to restock items focuses on supply chain efficiency rather than how well inventory meets customer needs. These factors, while important, do not specifically address the measure of service level as it pertains to fulfilling customer demand.