Using fill rates as service targets is problematic for another reason. Dealers have their own inventory control systems. For them, an 85 percent fill rate, say, with highly variant delays for the remaining 15 percent, would probably be worse than a 0 percent off-the-shelf fill rate with a reliable resupply time of one week. Understanding the dealers’ inventory control systems is the only way for the manufacturer to accurately set internal service targets.
Another benefit for incorporating dealers into the supply chain comes from sharing information. By knowing the dealers’ inventory levels, the manufacturer can respond accordingly. It can appropriately reprioritize dealer orders, expedite shipments, and use overtime. Similarly, dealers who have access to the manufacturer’s inventory status can respond to market changes more promptly.
Dealers’ inventory control systems determine, to a large extent, their reorder patterns, that is, frequency, size, and composition. Hence, understanding their inventory control systems would also improve the distribution network’s ability to forecast demand.