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Optimizer: IBM's Multi-Echelon Inventory System for Managing Service Logistics

Author

Listed:
  • Morris Cohen

    (Department of Decision Sciences, University of Pennsylvania, Philadelphia, Pennsylvania 19014)

  • Pasumarti V. Kamesam

    (IBM T. J. Watson Research Center, Yorktown Heights, New York 10598)

  • Paul Kleindorfer

    (Department of Decision Sciences, University of Pennsylvania, Philadelphia, Pennsylvania 19014)

  • Hau Lee

    (Department of Industrial Engineering, Stanford University, Stanford, California 94305)

  • Armen Tekerian

    (IBM National Service Division, Franklin Lakes, New Jersey 07417)

Abstract

IBM recently implemented Optimizer, a system for flexible and optimal control of service levels and spare parts inventory, in its US network for service support. It is based upon recent research in multi-echelon inventory theory to address the IBM network. The inherent complexity and very large scale of the basic problem required IBM to develop suitable algorithms and sophisticated data structures and required large-scale systems integration. Optimizer has greatly improved IBM's US service business. The implementation of Optimizer has made it possible to make strategic changes to the configuration and control of the parts distribution network. It resulted in simultaneously reducing inventory investment and operating costs and improving service levels. Most important, however, Optimizer has proven to be a highly flexible planning and operational control system.

Suggested Citation

  • Morris Cohen & Pasumarti V. Kamesam & Paul Kleindorfer & Hau Lee & Armen Tekerian, 1990. "Optimizer: IBM's Multi-Echelon Inventory System for Managing Service Logistics," Interfaces, INFORMS, vol. 20(1), pages 65-82, February.
    • Handle: RePEc:inm:orinte:v:20:y:1990:i:1:p:65-82
    DOI: 10.1287/inte.20.1.65
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    Cited by:

    1. de Kok, Ton & Grob, Christopher & Laumanns, Marco & Minner, Stefan & Rambau, Jörg & Schade, Konrad, 2018. "A typology and literature review on stochastic multi-echelon inventory models," European Journal of Operational Research, Elsevier, vol. 269(3), pages 955-983.
    2. Morris A. Cohen & Narendra Agrawal & Vipul Agrawal, 2006. "Achieving Breakthrough Service Delivery Through Dynamic Asset Deployment Strategies," Interfaces, INFORMS, vol. 36(3), pages 259-271, June.
    3. Biswas, S. & Narahari, Y., 2004. "Object oriented modeling and decision support for supply chains," European Journal of Operational Research, Elsevier, vol. 153(3), pages 704-726, March.
    4. Stenger, Alan J., 1996. "Reducing inventories in a multi-echelon manufacturing firm A case study," International Journal of Production Economics, Elsevier, vol. 45(1-3), pages 239-249, August.
    5. Johnson, Andrew & Carnovale, Steven & Song, Ju Myung & Zhao, Yao, 2021. "Drivers of fulfillment performance in mission critical logistics systems: An empirical analysis," International Journal of Production Economics, Elsevier, vol. 237(C).
    6. Candas, Mehmet Ferhat & Kutanoglu, Erhan, 2020. "Integrated location and inventory planning in service parts logistics with customer-based service levels," European Journal of Operational Research, Elsevier, vol. 285(1), pages 279-295.
    7. M N Jalil & R A Zuidwijk & M Fleischmann & Jo A E E van Nunen, 2011. "Spare parts logistics and installed base information," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(3), pages 442-457, March.
    8. Pinçe, Çerağ & Turrini, Laura & Meissner, Joern, 2021. "Intermittent demand forecasting for spare parts: A Critical review," Omega, Elsevier, vol. 105(C).
    9. Peter C. Bell & Chris K. Anderson, 2002. "In Search of Strategic Operations Research/Management Science," Interfaces, INFORMS, vol. 32(2), pages 28-40, April.
    10. Sang-Hyun Kim & Morris A. Cohen & Serguei Netessine & Senthil Veeraraghavan, 2010. "Contracting for Infrequent Restoration and Recovery of Mission-Critical Systems," Management Science, INFORMS, vol. 56(9), pages 1551-1567, September.
    11. Dekker, Rommert & Pinçe, Çerağ & Zuidwijk, Rob & Jalil, Muhammad Naiman, 2013. "On the use of installed base information for spare parts logistics: A review of ideas and industry practice," International Journal of Production Economics, Elsevier, vol. 143(2), pages 536-545.
    12. Al-Rifai, Mohammad H. & Rossetti, Manuel D., 2007. "An efficient heuristic optimization algorithm for a two-echelon (R, Q) inventory system," International Journal of Production Economics, Elsevier, vol. 109(1-2), pages 195-213, September.
    13. F. Tevhide Altekin & Ezgi Aylı & Güvenç Şahin, 2017. "After-sales services network design of a household appliances manufacturer," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(9), pages 1056-1067, September.
    14. Sheikh-Zadeh, Alireza & Rossetti, Manuel D. & Scott, Marc A., 2021. "Performance-based inventory classification methods for large-Scale multi-echelon replenishment systems," Omega, Elsevier, vol. 101(C).
    15. Boutselis, Petros & McNaught, Ken, 2014. "Finite-Time Horizon Logistics Decision Making Problems: Consideration of a Wider Set of Factors," Chapters from the Proceedings of the Hamburg International Conference of Logistics (HICL), in: Blecker, Thorsten & Kersten, Wolfgang & Ringle, Christian M. (ed.), Innovative Methods in Logistics and Supply Chain Management: Current Issues and Emerging Practices. Proceedings of the Hamburg International Conferenc, volume 19, pages 249-274, Hamburg University of Technology (TUHH), Institute of Business Logistics and General Management.
    16. Vikram Tiwari & Srinagesh Gavirneni, 2007. "ASP, The Art and Science of Practice: Recoupling Inventory Control Research and Practice: Guidelines for Achieving Synergy," Interfaces, INFORMS, vol. 37(2), pages 176-186, April.
    17. Kutanoglu, Erhan & Mahajan, Mohit, 2009. "An inventory sharing and allocation method for a multi-location service parts logistics network with time-based service levels," European Journal of Operational Research, Elsevier, vol. 194(3), pages 728-742, May.
    18. Peter C. Bell & Chris K. Anderson & Stephen P. Kaiser, 2003. "Strategic Operations Research and the Edelman Prize Finalist Applications 1989--1998," Operations Research, INFORMS, vol. 51(1), pages 17-31, February.
    19. Syntetos, A.A. & Babai, M.Z. & Davies, J. & Stephenson, D., 2010. "Forecasting and stock control: A study in a wholesaling context," International Journal of Production Economics, Elsevier, vol. 127(1), pages 103-111, September.
    20. Vinayak Deshpande & Morris A. Cohen & Karen Donohue, 2003. "An Empirical Study of Service Differentiation for Weapon System Service Parts," Operations Research, INFORMS, vol. 51(4), pages 518-530, August.
    21. Amy Cohn, 2006. "Composite-variable modeling for service parts logistics," Annals of Operations Research, Springer, vol. 144(1), pages 17-32, April.

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