Analysis of Spare Part Acquisation in Post Product life Cycle

Abstract

A major task in service management is the timely and cost efficient provision of spare parts for durable products. This especially holds when regular production of the respective product and its components and parts has ended, but customer service still has to be guaranteed for quite a long time. In such a post product life cycle there are three options to organize spare part acquisition, namely (i) setting up a single large order within the final lot of regular production, (ii) performing extra production runs until end of service and (iii) using remanufacturing to gain spare parts from used products. These three options are characterized by different cost and flexibility properties. Due to the time-variability and uncertainty of demands for spare parts and returns of used products it is a challenging problem to find the optimal combination in using these three options over time. In this paper we show how this problem can be modelled and solved by a Decision Tree and a stochastic Dynamic Programming procedure. Based on the Dynamic Programming approach a heuristic method is developed which can be employed to come up with a simple solution procedure for the spare parts acquisition problem, even for problems of larger size. A numerical example is presented to demonstrate the application of the solution methods described in the paper.