Last time buy and repair decisions for spare parts

Sina Behfard, Matthijs C. van der Heijden, Ahmad Al Hanbali, Willem H.M. Zijm

    Research output: Working paper

    456 Downloads (Pure)

    Abstract

    Original Equipment Manufacturers (OEM’s) of advanced capital goods often offer service contracts for system support to their customers, for which spare parts are needed. Due to technological changes, suppliers of spare parts may stop production at some point in time. As a reaction to that decision, an OEM may place a so-called Last Time Buy (LTB) order to cover demand for spare parts during the remaining service period, which may last for many years. The fact that there might be other alternative sources of supply in the next periods complicates the decision on the LTB. In this paper, we develop a heuristic method to find the near- optimal LTB quantity in presence of an imperfect repair option of the failed parts that can be returned from the field. Comparison of our method to simulation shows high approximation accuracy. Numerical experiments reveal that repair is an excellent option as alternative sourcing, even if it is more expensive than buying a new part, because of postponement of the repair decisions. In addition, we show the impact of other key parameters on costs and LTB quantity.
    Original languageEnglish
    Place of PublicationEindhoven
    PublisherBETA Research School for Operations Management and Logistics
    Number of pages42
    Publication statusPublished - 2013

    Publication series

    NameBeta working paper series
    PublisherBeta, Research School for Operations Management and Logistics
    No.429
    Volume429

    Keywords

    • IR-87108
    • METIS-297419

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