Which statement best describes service level and fill rate?

• A. Service level is the probability of meeting demand without stockouts; fill rate is the proportion of demand fulfilled from on-hand inventory.
• B. Service level is the proportion of orders filled on time; fill rate is the percentage of days with stock.
• C. Service level is the percentage of SKUs in stock; fill rate is the average inventory level.
• D. Service level and fill rate are the same concept.

Answer: (A)

Understanding the difference between service level and fill rate is key. Service level refers to the likelihood that you can meet customer demand without running into stockouts during a replenishment cycle—that is, the probability that stock is available when needed. Fill rate, on the other hand, measures how much of the actual demand you can satisfy directly from the inventory on hand, usually expressed as units filled divided by units demanded. So you’re looking at availability (probability of no stockout) versus the extent to which you can fulfill demand from what you have in stock.

That’s why the statement matches best: it defines service level as the probability of meeting demand without stockouts and fill rate as the proportion of demand fulfilled from on-hand inventory. The other descriptions mix timing, days, SKUs, or imply the two concepts are the same, which isn’t correct.