Demand categorisation in a European spare parts logistics network

Abstract

Purpose -Spare parts have become ubiquitous in modern societies and managing their requirements is an important and challenging task with tremendous cost implications for the organisations that are holding relevant inventories. An important operational issue involved in the management of spare parts is that of categorising the relevant stock keeping units (SKUs) in order to facilitate decision-making with respect to forecasting and stock control and to enable managers to focus their attention on the most "important" SKUs. This issue has been overlooked in the academic literature although it constitutes a significant opportunity for increasing spare parts availability and/or reducing inventory costs. Moreover, and despite the huge literature developed since the 1970s on issues related to stock control for spare parts, very few studies actually consider empirical solution implementation and with few exceptions, case studies are lacking. Such a case study is described in this paper, the purpose of which is to offer insight into relevant business practices. Design/methodology/approach -The issue of demand categorisation (including forecasting and stock control) for spare parts management is addressed and details reported of a project undertaken by an international business machine manufacturer for the purpose of improving its European spare parts logistics operations. The paper describes the actual intervention within the organisation in question, as well as the empirical benefits and the lessons learned from such a project. Findings -This paper demonstrates the considerable scope that exists for improving relevant real word practices. It shows that simple well-informed solutions result in substantial organisational savings. Originality/value -This paper provides insight into the empirical utilisation of demand categorisation theory for forecasting and stock control and provides some very much needed empirical evidence on pertinent issues. In that respect, it should be of interest to both academics and practitioners.

A systems approach for forward and reverse logistics design

“…In congruence with this, the Vanguard Method approach, in both case studies, built a one-piece flow of the system from the initial customer demand through to the delivery of the repair service to meet the requested demand, thus transferring the customer knowledge across the boundaries of the firm to support the work of logistics service operations. Consistent with prior demand prediction and categorization studies (Eaves and Kingsman, 2004;Boylan et al, 2008;Syntetos et al, 2009), the second theme of demand predictability and categorisation has shown dramatic change in the management of repair materials inventory control systems at both research sites. Although the Vanguard Method has allowed a basic stock control solution for the warehouse inventory and van stock materials, results suggest that the logistics service benefits were substantial.…”

Inventory management of spare parts in an energy company

“…A first observation is that the normal distribution is rejected for all the items. There is previous literature pointing out the limitations of the normal distribution to model demand of spare parts (see, e.g., [8], [21], [27] and [28]) and our work with real-world data provides additional evidence of that.…”

Spare parts management: Linking distributional assumptions to demand classification

“…Fortuin and Martin, 1999;Botter and Fortuin, 2000;Syntetos et al, 2009) have already pointed out, the management of spare parts and other inventory items with intermittent demand is a difficult task. A number of authors have argued that compound distributions could be used to model such intermittent demand patterns.…”