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Service differentiation in spare parts supply through dedicated stocks

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  • Elisa Alvarez
  • Matthieu Heijden
  • W. Zijm

Abstract

We investigate the option of keeping dedicated stocks at customer sites in addition to stock kept at some central location as a tool for applying service differentiation in spare parts supply. We study the resulting two-echelon system in a multi-item setting, both under backordering and under the use of emergency shipments (equivalent to lost sales for the inventory system). In an extensive computational experiment, we show that dedicated stocks have significant added value: the approach results in clear savings compared to a strategy of providing all customers with uniform service. Furthermore, the savings found with dedicated stocks are close to those with critical level policies, with dedicated stocks usually being much easier to implement in practice. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • 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.
    • Handle: RePEc:spr:annopr:v:231:y:2015:i:1:p:283-303:10.1007/s10479-013-1362-z
    DOI: 10.1007/s10479-013-1362-z
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    References listed on IDEAS

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    1. Bijvank, Marco & Vis, Iris F.A., 2011. "Lost-sales inventory theory: A review," European Journal of Operational Research, Elsevier, vol. 215(1), pages 1-13, November.
    2. A A Kranenburg & G J van Houtum, 2008. "Service differentiation in spare parts inventory management," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(7), pages 946-955, July.
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    5. 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.
    6. Arthur F. Veinott, 1965. "Optimal Policy in a Dynamic, Single Product, Nonstationary Inventory Model with Several Demand Classes," Operations Research, INFORMS, vol. 13(5), pages 761-778, October.
    7. Hill, R.M., 2007. "Continuous-review, lost-sales inventory models with Poisson demand, a fixed lead time and no fixed order cost," European Journal of Operational Research, Elsevier, vol. 176(2), pages 956-963, January.
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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. Arts, Joachim, 2017. "A multi-item approach to repairable stocking and expediting in a fluctuating demand environment," European Journal of Operational Research, Elsevier, vol. 256(1), pages 102-115.
    3. Sauvey, Christophe & Melo, Teresa & Correia, Isabel, 2019. "Two-phase heuristics for a multi-period capacitated facility location problem with service-differentiated customers," Technical Reports on Logistics of the Saarland Business School 16, Saarland University of Applied Sciences (htw saar), Saarland Business School.
    4. Yan, Tao & Lei, Yaguo & Wang, Biao & Han, Tianyu & Si, Xiaosheng & Li, Naipeng, 2020. "Joint maintenance and spare parts inventory optimization for multi-unit systems considering imperfect maintenance actions," Reliability Engineering and System Safety, Elsevier, vol. 202(C).
    5. Correia, Isabel & Melo, Teresa, 2019. "Dynamic facility location problem with modular capacity adjustments under uncertainty," Technical Reports on Logistics of the Saarland Business School 17, Saarland University of Applied Sciences (htw saar), Saarland Business School.
    6. Christiane B. Haubitz & Ulrich W. Thonemann, 2021. "How to Change a Running System—Controlling the Transition to Optimized Spare Parts Inventory Policies," Production and Operations Management, Production and Operations Management Society, vol. 30(5), pages 1386-1405, May.
    7. Christopher A. Boone & Benjamin T. Hazen & Joseph B. Skipper & Robert E. Overstreet, 2018. "A framework for investigating optimization of service parts performance with big data," Annals of Operations Research, Springer, vol. 270(1), pages 65-74, November.
    8. 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.

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