A Dynamic Failure Rate Forecasting Model for Service Parts Inventory

Ta-Yu Chen, Woo-Tsong Lin and Chwen Sheu
Additional contact information
Ta-Yu Chen: Department of Management Information Systems, National Chengchi University, No. 64, Sec. 2, Zhi-Nan Rd., Wenshan District, Taipei 11605, Taiwan
Woo-Tsong Lin: Department of Management Information Systems, National Chengchi University, No. 64, Sec. 2, Zhi-Nan Rd., Wenshan District, Taipei 11605, Taiwan
Chwen Sheu: Department of Management, Kansas State University, Manhattan, KS 66506, USA

Sustainability, 2018, vol. 10, issue 7, 1-23

Abstract: This study investigates one of the reverse logistics issues, after-sale repair service for in-warranty products. After-sale repair service is critical to customer service and customer satisfaction. Nonetheless, the uncertainty in the number of defective products returned makes forecasting and inventory planning of service parts difficult, which leads to a backlog of returned defectives or an increase in inventory costs. Based on Bathtub Curve (BTC) theory and Markov Decision Process (MDP), this study develops a dynamic product failure rate forecasting (PFRF) model to enable third-party repair service providers to effectively predict the demand for service parts and, thus, mitigate risk impacts of over- or under-stocking of service parts. A simulation experiment, based on the data collected from a 3C (computer, communication, and consumer electronics) firm, and a sensitivity analysis are conducted to validate the proposed model. The proposed model outperforms other approaches from previous studies. Considering the number of new products launched every year, the model could yield significant inventory cost savings. Managerial and research implications of our findings are presented, with suggestions for future research.

Keywords: green supply chains; reverse logistics; third-party repair service providers; failure rate forecast; service parts; bathtub curve theory; Markov Decision Process (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2071-1050/10/7/2408/pdf (application/pdf)
https://www.mdpi.com/2071-1050/10/7/2408/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:10:y:2018:i:7:p:2408-:d:157248

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().