Customer differentiated end-of-life inventory problem
AbstractThis paper deals with the service parts end-of-life inventory problem in a circumstance that demands for service parts are differentiated. Customer differentiation might be due to criticality of the demand or based on various service contracts. In both cases, we model the problem as a finite horizon stochastic dynamic program and characterize the structure of the optimal inventory policy. We show that when customers are differentiated based on the demand criticality then the optimal structure consists of time and state dependent threshold levels for inventory rationing. In case of differentiation based on service contracts, we show that in addition to rationing thresholds we also need contract extension thresholds by which the system decides whether to offer an extension to an expiring contract or not. By numerical experiments in both cases, we identify the value of incorporating such decisions in service parts end-of-life inventory management with customer differentiation. Moreover, we show that these decisions not only result in cost efficiency but also decrease the risk of part obsolescence drastically.
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Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Operational Research.
Volume (Year): 222 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/eor
End-of-life inventory; Spare parts; Customer differentiation;
Other versions of this item:
- Pourakbar, M. & Dekker, R., 2011. "Customer Differentiated End-of-Life Inventory Problem," Econometric Institute Research Papers EI 2011-21, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
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