The selective use of emergency shipments for service-contract differentiation

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    Suppliers of capital goods increasingly offer performance-based service contracts with customer-specific service levels. We use selective emergency shipments of spare parts to differentiate logistic performance: We apply emergency shipments in out-of-stock situations for combinations of parts and customer classes that yield service levels close to the class-specific targets. We develop two heuristics to solve this problem. An extensive numerical experiment reveals average cost savings of 4.4% compared to the one-size-fits-all approach that is often used in practice. It is best to combine our policy with critical levels, which yields an average cost saving of 13.9%.
    Original languageEnglish
    Pages (from-to)518-526
    Number of pages20
    JournalInternational journal of production economics
    Issue number2
    Publication statusPublished - 2013


    • METIS-285357
    • IR-79922


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