Excess inventories redeployment strategy for spare parts service logistics management

Abstract

Many leading companies are now offering global customers better spare parts services for system maintenance through a more complex service logistics network, extending beyond the traditional on-site stocking management, to boost profit margin. One challenge these spare parts service providers face is how to achieve desired service levels at a low cost through minimization of excess inventories in the global spare parts supply chain. To address this issue, we demonstrate an inventory redeployment strategy to transform a conventional spare parts supply chain (with forward stocking facilities only) into a closed-loop, multi-echelon service network with the capability of redeploying inventories from overstocking to understocking facilities, reducing purchase of high-value spare parts. To assess the quality of our novel solution approach, we used a network flow optimization model to analyze the proposed excess inventories redeployment strategy of an international company's service parts operations, and found significant inventory cost savings.