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Inventory Control in a Spare Parts Distribution System with Emergency Stocks and Pipeline Information

Author

Listed:
  • Christian Howard

    (Traffic and Road Users, The Swedish National Road and Transport Research Institute (VTI), SE-581 95 Linköping, Sweden)

  • Johan Marklund

    (Industrial Management and Logistics, Lund University, 221 00 Lund, Sweden)

  • Tarkan Tan

    (Industrial Engineering and Innovation Sciences, Eindhoven University of Technology, 5612 AZ Eindhoven, The Netherlands)

  • Ingrid Reijnen

    (Gordian Logistic Experts, 3528 BG Utrecht, The Netherlands)

Abstract

Motivated by collaboration with a global spare parts service provider, we consider a two-echelon inventory system with multiple local warehouses, a so-called support warehouse, and a central warehouse with ample capacity. In case of stock-outs, the local warehouses can receive emergency shipments from the support warehouse or the central warehouse at an extra cost. Our focus is on using information on orders in the replenishment pipeline, i.e., pipeline information, to achieve cost-efficient policies for requesting emergency shipments. We introduce a policy where the request for an emergency shipment is based on the time until an outstanding order will reach the stock point considered. The goal is to determine how long one should wait for stock in the replenishment pipeline before requesting an emergency shipment, and the cost effects of using pipeline information in this manner. The analysis utilizes results from queuing theory and provides a decomposition technique for optimizing the policy parameters that reduces the complex multiechelon problem to more manageable single-echelon problems. The performance of our policy indicates that there can be a significant benefit in using pipeline information.

Suggested Citation

  • Christian Howard & Johan Marklund & Tarkan Tan & Ingrid Reijnen, 2015. "Inventory Control in a Spare Parts Distribution System with Emergency Stocks and Pipeline Information," Manufacturing & Service Operations Management, INFORMS, vol. 17(2), pages 142-156, May.
    • Handle: RePEc:inm:ormsom:v:17:y:2015:i:2:p:142-156
    DOI: 10.1287/msom.2014.0508
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    References listed on IDEAS

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    5. van Wijk, A.C.C. & Adan, I.J.B.F. & van Houtum, G.J., 2019. "Optimal lateral transshipment policies for a two location inventory problem with multiple demand classes," European Journal of Operational Research, Elsevier, vol. 272(2), pages 481-495.
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    14. van Wingerden, E. & Tan, T. & Van Houtum, G.J., 2019. "The impact of an emergency warehouse in a two-echelon spare parts network," European Journal of Operational Research, Elsevier, vol. 276(3), pages 983-997.
    15. Van der Heide, G. & Van Foreest, N.D. & Roodbergen, K.J., 2018. "Optimizing stock levels for rental systems with a support warehouse and partial backordering," European Journal of Operational Research, Elsevier, vol. 265(1), pages 107-118.
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