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A Major Appliance Manufacturer Rethinks Its Inventory Policies for Service Vehicles

Author

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  • 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
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    References listed on IDEAS

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    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. 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.
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    6. 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.
    7. 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.
    Full references (including those not matched with items on IDEAS)

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    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.

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