The Background: Role and Relevance in Distribution Service

Preferences and needs of purchasers must be thoroughly defined and analysed when a supplier is establishing criteria upon which to evaluate distribution service within cost constraints. Historically, time and time‐related standards have served as primary, and often only measures of customer service. This temporal emphasis is understandable, given the characteristics of delivery schedules, inventory management, and goods handling systems; however, time‐based standards should not preclude consideration of other service measures. Research has indicated that the backorder may be a useful alternative or supplementary measure of customer service. Morgan concluded that the backorder is “an inverse measure of service achievement”. Perreault and Russ found that 25 % of the purchasing managers they surveyed cancelled more than one‐fourth of all orders which were backordered. Others have suggested that the backorder is a useful service criterion. In those cases where finished goods inventory is not ordinarily present in the system between the production line and the customer it becomes an extremely useful potential measure of performance.