Service Parts Inventory Control with Lateral Transshipment and Pipeline Stock Flexibility

Tinbergen Institute Discussion Paper 10-025/4

32 Pages Posted: 28 Feb 2010 Last revised: 15 Nov 2012

See all articles by Guangyuan Yang

Guangyuan Yang

Tinbergen Institute; Erasmus University Rotterdam (EUR); Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Rommert Dekker

Erasmus University, Rotterdam (EUR) - Erasmus School of Economics ; Econometric Institute; Erasmus University, Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM) ; Tinbergen Institute Rotterdam

Adriana F. Gabor

Erasmus University Rotterdam (EUR)

Sven Axsater

Lund University

Date Written: February 26, 2010

Abstract

In equipment-intensive industries such as truck, electronics, aircraft and dredging vessel manufacturing, service parts are often slow moving items for which, in some cases, the transshipment time is not negligible. However, this aspect is hardly considered in the existing service logistics literature. In this paper, we consider this aspect and propose a customer-oriented service measure which takes into account pipeline stock and lateral transshipment flexibility. We provide an approximation method for optimizing the stock allocation subject to this service measure. Via extensive numerical experiments, we show that our approximation performs very well for both system performance and costs. Moreover, our numerical experiments show that including lateral transshipment and pipeline stock flexibility in inventory decisions is more beneficial than lateral transshipment alone. The magnitude of this effect is higher for high demand rates and high lateral transshipment cost. Results from a case study in the dredging industry confirm our findings. We therefore recommend the introduction of the pipeline stock information such as the track and trace information from freight carriers in existing ERP systems.

Keywords: Inventory Control, Lateral Transshipment, METRIC, Customer-oriented Service Level

JEL Classification: C06, C6, C61

Suggested Citation

Yang, Guangyuan and Dekker, Rommert and Dekker, Rommert and Gabor, Adriana F. and Axsater, Sven, Service Parts Inventory Control with Lateral Transshipment and Pipeline Stock Flexibility (February 26, 2010). Tinbergen Institute Discussion Paper 10-025/4, Available at SSRN: https://ssrn.com/abstract=1559874 or http://dx.doi.org/10.2139/ssrn.1559874

Guangyuan Yang (Contact Author)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Rommert Dekker

Erasmus University, Rotterdam (EUR) - Erasmus School of Economics ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 10 408 1274 (Phone)
+31 10 408 9162 (Fax)

HOME PAGE: http://www.few.eur.nl/few/people/rdekker/

Econometric Institute ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

HOME PAGE: http://https://www.eur.nl/people/rommert-dekker

Erasmus University, Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Tinbergen Institute Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Adriana F. Gabor

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Sven Axsater

Lund University ( email )

Box 117
Lund, SC Skane S221 00
Sweden

HOME PAGE: http://www.pm.lth.se/personal/sven_axsaeter/

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