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Allocating service parts in two-echelon networks at a utility company

Author

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  • van den Berg, D.
  • van der Heijden, M.C.
  • Schuur, P.C.

Abstract

We study a multi-item, two-echelon, continuous-review inventory problem at a Dutch utility company. We develop a model for the optimal allocation of service parts in a two-echelon network under an aggregate waiting time constraint. Specific model aspects are emergency shipments in case of stockout, and batching for regular replenishment orders at the central warehouse. We use column generation to solve this problem with various building blocks for single-item models as columns. Further, we derive simple classification rules from the solution of our multi-item, two-echelon service part optimization problem using statistical techniques. Application of our models at Liander yields a cost reduction of 15% and a decrease in the impact of waiting time for service parts by 52%.

Suggested Citation

  • van den Berg, D. & van der Heijden, M.C. & Schuur, P.C., 2016. "Allocating service parts in two-echelon networks at a utility company," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 58-67.
    • Handle: RePEc:eee:proeco:v:181:y:2016:i:pa:p:58-67
    DOI: 10.1016/j.ijpe.2015.08.025
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    References listed on IDEAS

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    1. Erhun Özkan & Geert-Jan Houtum & Yasemin Serin, 2015. "A new approximate evaluation method for two-echelon inventory systems with emergency shipments," Annals of Operations Research, Springer, vol. 224(1), pages 147-169, January.
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    9. Elisa Alvarez & Matthieu Heijden & W. Zijm, 2015. "Service differentiation in spare parts supply through dedicated stocks," Annals of Operations Research, Springer, vol. 231(1), pages 283-303, August.
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    11. Alvarez, E.M. & van der Heijden, M.C. & Zijm, W.H.M., 2013. "The selective use of emergency shipments for service-contract differentiation," International Journal of Production Economics, Elsevier, vol. 143(2), pages 518-526.
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