A two-echelon two-indenture warranty distribution network development and optimization under batch-ordering inventory policy

Abstract

The use of the warranty distribution network (WDN) to support after-sales service contributes to the stakeholders’ market competition and becomes popular in the modern business. However, there are two major challenges in the development of WDN: 1) locating repair centers and allocating corresponding customers, and 2) choosing the spare parts inventory policy for each repair center. In order to address these two challenges, this paper proposes a customized location-allocation WDN model under batch-ordering inventory policy where repair center acts as a two-layer system (two-echelon) to support a set of customers in a two-layer network (two-indenture). In this network, a depot repair center is selected to meet the orders through a high-capacity supplier in the first echelon and a certain number of sub-repair centers are determined to cover customers in the second echelon. To optimize the proposed model, a two-stage solution approach based on Monte-Carlo simulation and Variable Neighborhood Search is developed. The electric vehicle battery system case study is used to validate the proposed model and solution approach. The obtained results showed that depending on the budget available, spare parts inventory level in the operational repair centers is positively associated their distance to the depot repair center.