Service differentiation in spare parts supply through dedicated stocks

Elisa Alvarez (), Matthieu Heijden () and W. Zijm ()

Annals of Operations Research, 2015, vol. 231, issue 1, 283-303

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

Keywords: Service differentiation; Dedicated stocks; Spare parts; Multi-echelon systems; Lost sales (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s10479-013-1362-z

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