The effects of customization on spare part business: A case study in the metal industry

Abstract

This paper aims to point out the consequences of customization in spare part operations. The spare part business is taken to be the purchasing, warehousing, selling and delivering of spare parts. In addition, customer service, such as handling warranty issues, is seen as a part of the spare part business. The impact of the spare part business on company profit tends to be significant. The case company represents an industry in which customization is a typical phenomenon. Customized products are slight variations of standard configurations and are typically developed in response to a specific order by a customer. Fulfilling individual customer needs in the customization process is likely to increase customer loyalty. The case study conducted in the metal industry takes a constructive approach. At the initial stage of the project, company representatives expected customization to have a negative impact on spare part business profit. By identifying and categorizing different customization cases from the spare part business's point of view a framework is established to assist R&D and product management in decision-making related to modifications of a standard product. The study suggests that if customization leads to an increase in the number of seldom sold items the personnel costs are in a significant role. The effects on the inventory level were minor.