Service differentiation in spare parts supply through dedicated stocks

    Research output: Working paper

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    We investigate keeping dedicated stocks at customer sites in addition to stock kept at some central location as a tool for applying service differentiation in spare parts supply. We study the resulting two-echelon system in a multi-item setting, both under backordering and under emergency shipments assumptions (i.e. lost sales). In an extensive computational experiment, we show that dedicated stocks have significant added value: compared to an approach where all customers receive uniform service, we find average cost savings of 14% under backordering and 20% under emergency shipments. Furthermore, we find that dedicated stocks are comparable to critical level policies in terms of cost savings, while being much easier to implement in practice. Finally, we find further savings (20% under backordering, 23% under emergency shipments) by combining dedicated stocks and critical level policies in one aggregate differentiation strategy.
    Original languageDutch
    Place of PublicationEindhoven
    PublisherBETA Research School for Operations Management and Logistics
    Publication statusPublished - 2012

    Publication series

    NameBeta working paper series
    PublisherBeta Research School for Operations Management and Logistics


    • IR-85229
    • METIS-295350

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