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Improving global spare parts distribution chain performance through part categorization: A case study

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  • Jouni, Paakki
  • Huiskonen, Janne
  • Pirttilä, Timo
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    Abstract

    Spare parts inventory management is a complex problem and in most cases part categorization is needed to create a manageable number of control groups to focus management efforts more effectively. Usually multi-dimensional or multi-criteria classifications are used, and there are several examples of classification schemes available in the literature. The complexity increases even more when taking into consideration that a distribution chain consists of many parties. Thus, in addition to internal inventory control factors, external factors such as supplier performance, customer behavior and related demand patterns affect the controllability of the various parts. In the paper we try to expand existing classification schemes that cover only one part of the supply chain into a decision tool covering three sides of the chain: the company's distribution center with its internal processes, supplier with supply processes and customer with demand processes. The complexity that is created by the expanded view is reduced by considering two separate links: demand link and supply link. At first the links are analyzed separately considering the most relevant factors of each one and afterwards they are combined into a categorization matrix to classify the parts. The categorization scheme is tested in a large international company for improving its spare parts distribution chain performance. In the case company's demand link, part value and demand variability were used as the factors to create seven categories. In supply link, three categories are created by using availability risk of the material as the categorizing factor. The spare parts distribution chain performance is analyzed with service performance and stock-out cost key performance indicators before and after improvement actions. Finally, it is discussed how widely the insights from the case experience can be generalized towards developing a generic management tool for such a complex situation.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Journal of Production Economics.

    Volume (Year): 133 (2011)
    Issue (Month): 1 (September)
    Pages: 164-171

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    Handle: RePEc:eee:proeco:v:133:y:2011:i:1:p:164-171

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    Web page: http://www.elsevier.com/locate/ijpe

    Related research

    Keywords: Spare parts Distribution chain management Classification Case study Reduction of variability;

    References

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    1. Kalchschmidt, Matteo & Zotteri, Giulio & Verganti, Roberto, 2003. "Inventory management in a multi-echelon spare parts supply chain," International Journal of Production Economics, Elsevier, vol. 81(1), pages 397-413, January.
    2. Joan E. van Aken, 2004. "Management Research Based on the Paradigm of the Design Sciences: The Quest for Field-Tested and Grounded Technological Rules," Journal of Management Studies, Wiley Blackwell, vol. 41(2), pages 219-246, 03.
    3. Huiskonen, Janne, 2001. "Maintenance spare parts logistics: Special characteristics and strategic choices," International Journal of Production Economics, Elsevier, vol. 71(1-3), pages 125-133, May.
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    Cited by:
    1. Bacchetti, A. & Plebani, F. & Saccani, N. & Syntetos, A.A., 2013. "Empirically-driven hierarchical classification of stock keeping units," International Journal of Production Economics, Elsevier, vol. 143(2), pages 263-274.
    2. Molenaers, An & Baets, Herman & Pintelon, Liliane & Waeyenbergh, Geert, 2012. "Criticality classification of spare parts: A case study," International Journal of Production Economics, Elsevier, vol. 140(2), pages 570-578.

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