IDEAS home Printed from https://ideas.repec.org/a/inm/orinte/v36y2006i5p407-419.html
   My bibliography  Save this article

A Major Appliance Manufacturer Rethinks Its Inventory Policies for Service Vehicles

Author

Listed:
  • Michael F. Gorman

    (Department of MIS, Operations Management and Decision Sciences, School of Business Administration, University of Dayton, 300 College Park, Dayton, Ohio 45469-2130)

  • Sanjay Ahire

    (Moore School of Business, University of South Carolina, Columbia, South Carolina 29208)

Abstract

A major appliance manufacturer needed to effectively manage $7 million in inventories of repair and replacement parts housed in more than 1,300 service vehicles used for warranty repairs. The manufacturer wanted to optimize the inventories while ensuring that its technicians carried the parts they needed to repair customers’ appliances on the first visit. Typically, service vehicles carry only 400 of the 70,000 parts stocked centrally. Thus, the appropriate composition of vehicle stock is essential to attain acceptable levels of service and costs. We developed and applied an intuitive, efficient, effective, and easy-to-implement heuristic solution to this vehicle-stocking problem and found that the firm could trim more than $3 million per year from its warranty repair costs and increase its first-visit repair rate from 86 percent to 90 percent. The results of a pilot study supported these findings, and we estimated a payback of less than two years on full-scale implementation. The manufacturer is implementing these improved vehicle-stocking policies across its national network.

Suggested Citation

  • Michael F. Gorman & Sanjay Ahire, 2006. "A Major Appliance Manufacturer Rethinks Its Inventory Policies for Service Vehicles," Interfaces, INFORMS, vol. 36(5), pages 407-419, October.
    • Handle: RePEc:inm:orinte:v:36:y:2006:i:5:p:407-419
    DOI: 10.1287/inte.1060.0232
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/inte.1060.0232
    Download Restriction: no
    File URL: https://libkey.io/10.1287/inte.1060.0232?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stephen C. Graves, 1982. "Note---A Multiple-Item Inventory Model with a Job Completion Criterion," Management Science, INFORMS, vol. 28(11), pages 1334-1337, November.
    2. Salvatore T. March & Gary D. Scudder, 1984. "Note---On "Optimizing Field Repair Kits Based on Job Completion Rate"," Management Science, INFORMS, vol. 30(8), pages 1025-1028, August.
    3. John W. Mamer & Stephen A. Smith, 1982. "Optimizing Field Repair Kits Based on Job Completion Rate," Management Science, INFORMS, vol. 28(11), pages 1328-1333, November.
    4. Heeremans, D. & Gelders, L. F., 1995. "Multiple period repair kit problem with a job completion criterion: A case study," European Journal of Operational Research, Elsevier, vol. 81(2), pages 239-248, March.
    5. John W. Mamer & Stephen A. Smith, 1985. "Job Completion Based Inventory Systems: Optimal Policies for Repair Kits and Spare Machines," Management Science, INFORMS, vol. 31(6), pages 703-718, June.
    6. Shelby Brumelle & Daniel Granot, 1993. "The Repair Kit Problem Revisited," Operations Research, INFORMS, vol. 41(5), pages 994-1006, October.
    7. Stephen A. Smith & John C. Chambers & Eli Shlifer, 1980. "Note---Optimal Inventories Based on Job Completion Rate for Repairs Requiring Multiple Items," Management Science, INFORMS, vol. 26(8), pages 849-854, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael F. Gorman, 2021. "Contextual Complications in Analytical Modeling: When the Problem is Not the Problem," Interfaces, INFORMS, vol. 51(4), pages 245-261, July.
    2. Michael F. Gorman, 2023. "Case Article—Swirltubs After-Market Product Inventory and Service Case," INFORMS Transactions on Education, INFORMS, vol. 23(3), pages 149-151, May.
    3. Sanjay L. Ahire & John B. Jensen, 2017. "Snider Tire Optimizes Its Customers-Stores-Plants Transportation Network," Interfaces, INFORMS, vol. 47(2), pages 150-162, April.
    4. Michael F. Gorman & Jayden Hoff & Robert Kinion, 2009. "ASP, The Art and Science of Practice: Tales from the Front: Case Studies Indicate the Potential Pitfalls of Misapplication of Lean Improvement Programs," Interfaces, INFORMS, vol. 39(6), pages 540-548, December.
    5. Neves-Moreira, Fábio & Veldman, Jasper & Teunter, Ruud H., 2021. "Service operation vessels for offshore wind farm maintenance: Optimal stock levels," Renewable and Sustainable Energy Reviews, Elsevier, vol. 146(C).
    6. Michael F. Gorman, 2010. "Hub Group Implements a Suite of OR Tools to Improve Its Operations," Interfaces, INFORMS, vol. 40(5), pages 368-384, October.
    7. Shuang Chen & Joseph Geunes, 2013. "Optimal allocation of stock levels and stochastic customer demands to a capacitated resource," Annals of Operations Research, Springer, vol. 203(1), pages 33-54, March.
    8. Büther, Marcel & Briskorn, Dirk, 2007. "Reducing the 0-1 knapsack problem with a single continuous variable to the standard 0-1 knapsack problem," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 629, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christoph Rippe & Gudrun P. Kiesmüller, 2023. "The added value of advance demand information for the planning of a repair kit," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 31(1), pages 311-335, March.
    2. Rippe, Christoph & Kiesmüller, Gudrun P., 2023. "The repair kit problem with imperfect advance demand information," European Journal of Operational Research, Elsevier, vol. 304(2), pages 558-576.
    3. Prak, Dennis & Saccani, Nicola & Syntetos, Aris & Teunter, Ruud & Visintin, Filippo, 2017. "The Repair Kit Problem with positive replenishment lead times and fixed ordering costs," European Journal of Operational Research, Elsevier, vol. 261(3), pages 893-902.
    4. Teunter, Ruud H. & Klein Haneveld, Willem K., 2002. "Inventory control of service parts in the final phase: A central depot and repair kits," European Journal of Operational Research, Elsevier, vol. 138(1), pages 76-86, April.
    5. Rachel Q. Zhang, 1999. "Expected time delay in multi‐item inventory systems with correlated demands," Naval Research Logistics (NRL), John Wiley & Sons, vol. 46(6), pages 671-688, September.
    6. Heeremans, D. & Gelders, L. F., 1995. "Multiple period repair kit problem with a job completion criterion: A case study," European Journal of Operational Research, Elsevier, vol. 81(2), pages 239-248, March.
    7. K Liu & J-A Li & Y Wu & K K Lai, 2005. "Analysis of monitoring and limiting of commercial cheating: a newsvendor model," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(7), pages 844-854, July.
    8. Liu, Ke & Li, Jing-An & Lai, Kin Keung, 2004. "Single period, single product newsvendor model with random supply shock," European Journal of Operational Research, Elsevier, vol. 158(3), pages 609-625, November.
    9. Bijvank, Marco & Koole, Ger & Vis, Iris F.A., 2010. "Optimising a general repair kit problem with a service constraint," European Journal of Operational Research, Elsevier, vol. 204(1), pages 76-85, July.
    10. Renato de Matta & Vernon Ning Hsu & Timothy J. Lowe, 1999. "Capacitated selection problem," Naval Research Logistics (NRL), John Wiley & Sons, vol. 46(1), pages 19-37, February.
    11. Michael F. Gorman, 2023. "Case Article—Swirltubs After-Market Product Inventory and Service Case," INFORMS Transactions on Education, INFORMS, vol. 23(3), pages 149-151, May.
    12. Vliegen, I.M.H. & van Houtum, G.J., 2009. "Approximate evaluation of order fill rates for an inventory system of service tools," International Journal of Production Economics, Elsevier, vol. 118(1), pages 339-351, March.
    13. Vliegen, I.M.H. & Kleingeld, P.A.M. & van Houtum, G.J., 2010. "Separate tools or tool kits: An exploratory study of engineers' preferences," International Journal of Production Economics, Elsevier, vol. 125(1), pages 173-184, May.
    14. Narendra Agrawal & Morris A. Cohen, 2001. "Optimal material control in an assembly system with component commonality," Naval Research Logistics (NRL), John Wiley & Sons, vol. 48(5), pages 409-429, August.
    15. Jing-Sheng Song, 1998. "On the Order Fill Rate in a Multi-Item, Base-Stock Inventory System," Operations Research, INFORMS, vol. 46(6), pages 831-845, December.
    16. Teunter, Ruud H., 2006. "The multiple-job repair kit problem," European Journal of Operational Research, Elsevier, vol. 175(2), pages 1103-1116, December.
    17. Kathryn E. Caggiano & Peter L. Jackson & John A. Muckstadt & James A. Rappold, 2007. "Optimizing Service Parts Inventory in a Multiechelon, Multi-Item Supply Chain with Time-Based Customer Service-Level Agreements," Operations Research, INFORMS, vol. 55(2), pages 303-318, April.
    18. Stephen A. Smith & Narendra Agrawal, 2000. "Management of Multi-Item Retail Inventory Systems with Demand Substitution," Operations Research, INFORMS, vol. 48(1), pages 50-64, February.
    19. Narendra Agrawal & Stephen A. Smith, 2003. "Optimal retail assortments for substitutable items purchased in sets," Naval Research Logistics (NRL), John Wiley & Sons, vol. 50(7), pages 793-822, October.
    20. Albrecht, Martin, 2014. "Determining near optimal base-stock levels in two-stage general inventory systems," European Journal of Operational Research, Elsevier, vol. 232(2), pages 342-349.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:orinte:v:36:y:2006:i:5:p:407-419. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.