End-of-Life Inventory Decisions for Consumer Electronics Service Parts
AbstractWe consider a consumer electronics (CE) manufacturerâ€™s problem of controlling the inventoryof spare parts in the final phase of the service life cycle. The final phase starts when thepart production is terminated and continues until the last service contract or warranty periodexpires. Placing final orders for service parts is considered to be a popular tactic to satisfy demandduring this period and to mitigate the effect of part obsolescence at the end of the servicelife cycle. To satisfy demand for service in the final phase, previous research focuses on repairingdefective products by replacing the defective parts with properly functioning spare ones.However, for consumer electronic products there is a remarkable price erosion while repaircosts may stay steady over time. As a consequence, this introduces the idea that there mightbe a point in time at which the unit price of the product is lower than repair associated costs.Therefore, it would be more cost effective to adopt an alternative policy to meet demands forservice such as offering customers a replacement of the defective product with a new one orgiving a discount on the next generation of the product. This paper examines the cost trade-offsof implementing alternative policies for the repair policy and develops an exact formulation forthe expected total cost function. Based on this developed cost function we propose policies tosimultaneously find the optimal final order quantity and the time to switch from the repair toan alternative replacement policy. Numerical analysis of a real world case study sheds lightover the effectiveness and advantage of these policies in terms of cost reduction and also yieldsinsights into the quantitative importance of the various cost parameters.
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Bibliographic InfoPaper provided by Erasmus University Rotterdam, Econometric Institute in its series Econometric Institute Report with number EI 2009-48.
Date of creation: 02 Mar 2010
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consumer electronics; end-of-life inventory control; service parts;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-20 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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