The selective use of emergency shipments for service-contract differentiation

E.M. Alvarez, M.C. van der Heijden and W.H.M. Zijm

International Journal of Production Economics, 2013, vol. 143, issue 2, 518-526

Abstract: Suppliers of capital goods increasingly offer performance-based service contracts with customer-specific service levels. To handle such differentiated service levels, we use selective emergency shipments of spare parts. We apply emergency shipments in out-of-stock situations for combinations of parts and customer classes that yield service levels close to the class-specific targets. We develop two heuristics to solve this problem. An extensive numerical experiment reveals average cost savings of 4.4% compared to the one-size-fits-all approach that is often used in practice. Furthermore, it is particularly beneficial to combine our policy with critical levels, which yields an average cost saving of 13.9%.

Keywords: Inventory; Customer differentiation; Emergency shipments; Service contracts; Critical levels (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:143:y:2013:i:2:p:518-526

DOI: 10.1016/j.ijpe.2012.02.019

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