Distinguish between service level and fill rate.

• A. Service level is the probability of meeting demand without stockouts; fill rate is the percentage of demand fulfilled from inventory.
• B. Service level is the percentage of demand fulfilled; fill rate is the probability of stockouts.
• C. Service level measures supplier lead time; fill rate measures order processing speed.
• D. Service level equals cycle time.

Answer: (A)

The main idea is that these two metrics measure different aspects of how inventory meets demand. Service level is a probability: the likelihood that you can meet demand without any stockouts in a given period or cycle. It’s about the risk of running out and failing to satisfy demand at least once during the planning horizon.

Fill rate is a quantity-based measure: the portion of total demand that is actually fulfilled from the inventory on hand, typically expressed as a percentage. It shows how much of what customers want today you can cover with current stock, regardless of whether you later backorder or backfill any unmet portion.

So the correct description aligns with service level as the probability of avoiding stockouts and fill rate as the percentage of demand met from inventory. The other statements mix up these concepts—service level isn’t simply a measure of lead or cycle time, and fill rate isn’t defined as a stockout probability.