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Determining Optimal Order Amount for End-of-Life Parts Acquisition with Possibility of Contract Extension

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  • Nicholas W. Leifker
  • Philip C. Jones
  • Timothy J. Lowe

Abstract

Manufacturers often encounter difficulties in supplying an adequate number of spare parts for a product in its postproduction phase. As a result, manufacturers will sometimes make one final order of a model of spare part that is used to satisfy any demand for the spare part going forward. The problem is compounded when a customer may request an extension to the maintenance or supply contract for which the part is supplied. We present two possible approaches for dealing with the problem: one involves the use of a continuous-time dynamic program that allows for the possibility of salvage, and the other makes use of a two-stage stochastic algorithm that does not consider salvage.

Suggested Citation

  • Nicholas W. Leifker & Philip C. Jones & Timothy J. Lowe, 2014. "Determining Optimal Order Amount for End-of-Life Parts Acquisition with Possibility of Contract Extension," The Engineering Economist, Taylor & Francis Journals, vol. 59(4), pages 259-281, October.
    • Handle: RePEc:taf:uteexx:v:59:y:2014:i:4:p:259-281
    DOI: 10.1080/0013791X.2014.903449
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    Cited by:

    1. Behfard, S. & van der Heijden, M.C. & Al Hanbali, A. & Zijm, W.H.M., 2015. "Last time buy and repair decisions for spare parts," European Journal of Operational Research, Elsevier, vol. 244(2), pages 498-510.
    2. Ozyoruk, Emin & Erkip, Nesim Kohen & Ararat, Çağın, 2022. "End-of-life inventory management problem: Results and insights," International Journal of Production Economics, Elsevier, vol. 243(C).

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