SUPPLY CHAIN SERVICE STRATEGY

E d w a r d H . F r a z e l l e , P h . D . fill rate target.” (That target was 88%.) The band strikes up. Balloons drop. Confetti showers. Once the ballyhoo died down, the CEO said, “Unfortunately, I have some bad news. There is no bonus to report this quarter. There is no profit.” Why do you think there was no profit? Fill rate and profitability are indissoluble. After the Bonus Day “celebration” I met with the head of inventory planning. During the meeting, I asked how they incorporated their fill rate target in inventory planning?” He said, “We just set that as the target for every item.” I said, “Okay. Suppose you call Land’s End and they don’t have a medium, white, turtleneck shirt? Land’s End being out of medium, white turtleneck shirts is like what happened to us when we went to a Kentucky Fried Chicken and they did not have chicken. Eighty eight percent availability on medium white turtle neck shirts ain’t gonna’ cut it. That’s the next click to L.L. Bean so fast it wouldmake your head spin.” I then asked their inventory planning team to name one of their most obscure items. They immediately and unanimously called out the same item — paisley dog beds. I asked incredulously, “You mean you have an 88% fill rate target for paisley dog beds?” They said, “Oh yeah, the target is 88% for everything.” The first thing I thought is that they should not even have paisley dog beds. I asked, “What is the forecast error on paisley dog beds?” They said, “It is so high we can’t even calculate | 9

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