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After-market spare parts inventory centralization at Sandvik Mining and Rock Technology.

Brückner, Ruben and Higab, Jawdat (2018) MIOM01
Production Management
Abstract
Background: In spare parts logistics, customers expect a high availability of spare parts from
their providers. It is very critical for spare parts providers to be able to satisfy customers’ demands.
It acts as a differentiator in the customer’s buying decision. Sandvik, an engineering
company, is interested in improving their spare parts logistics. The case company is interested in
benefits from centralizing their inventory. They target increasing their inventory service levels,
while at the same time, having a feasible solution. Inventory centralization is thought of interest
because of the risk pooling benefits that lowers the demand uncertainty. Thus, higher service
levels can be achieved with lower global safety stocks.
... (More)
Background: In spare parts logistics, customers expect a high availability of spare parts from
their providers. It is very critical for spare parts providers to be able to satisfy customers’ demands.
It acts as a differentiator in the customer’s buying decision. Sandvik, an engineering
company, is interested in improving their spare parts logistics. The case company is interested in
benefits from centralizing their inventory. They target increasing their inventory service levels,
while at the same time, having a feasible solution. Inventory centralization is thought of interest
because of the risk pooling benefits that lowers the demand uncertainty. Thus, higher service
levels can be achieved with lower global safety stocks.
Purpose: The purpose of the thesis is to investigate, model and analyze a centralized spare parts
inventory solution for the case company.
Methodology: Mathematical modeling of single-echelon, single item inventory systems using
Visual Basic for Applications within Microsoft Excel is a core method for this thesis. All data
were collected from the case company. Quantitative data was the dominant type of data to be
used. However, qualitative data complemented the quantitative one where necessary. The thesis
follows an abductive approach but with an emphasis on deductive methods.
Conclusions: Fully centralizing inventory achieves better service levels with lower safety stocks
if compared to a less centralized model. However, the transportation time towards customers
increases. Customers experience availability as a performance measure. Availability includes
keeping high shelf availability and short delivery times. In this thesis, a fully centralized and
a partially centralized inventory solution are further investigated. However, it is recommended
to balance the conflicting goals of providing fast delivery speed and lowering inventory. In all
investigated models fill-rate is increased by 55% if compared to the current state. In the fully
centralized model the company can achieve a higher fill-rate and at the same time lower its inventory
(cycle and safety stock) by 28 %. However, to achieve the same fill-rate in the partially
centralized model, the company is expected to increase inventory by 40 % on average if compared
to the current state. Also, the case company is expected to deliver the spare-parts quicker to the
customer in the partially centralized model when compared to the fully centralized model. (Less)
Please use this url to cite or link to this publication:
author
Brückner, Ruben and Higab, Jawdat
supervisor
organization
course
MIOM01
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Inventory Management, Inventory Centralization, Single-Echelon Inventory Models, spare parts Logistics
language
English
id
8955954
date added to LUP
2018-08-13 16:31:11
date last changed
2018-08-14 14:51:54
@misc{8955954,
  abstract     = {{Background: In spare parts logistics, customers expect a high availability of spare parts from
their providers. It is very critical for spare parts providers to be able to satisfy customers’ demands.
It acts as a differentiator in the customer’s buying decision. Sandvik, an engineering
company, is interested in improving their spare parts logistics. The case company is interested in
benefits from centralizing their inventory. They target increasing their inventory service levels,
while at the same time, having a feasible solution. Inventory centralization is thought of interest
because of the risk pooling benefits that lowers the demand uncertainty. Thus, higher service
levels can be achieved with lower global safety stocks.
Purpose: The purpose of the thesis is to investigate, model and analyze a centralized spare parts
inventory solution for the case company.
Methodology: Mathematical modeling of single-echelon, single item inventory systems using
Visual Basic for Applications within Microsoft Excel is a core method for this thesis. All data
were collected from the case company. Quantitative data was the dominant type of data to be
used. However, qualitative data complemented the quantitative one where necessary. The thesis
follows an abductive approach but with an emphasis on deductive methods.
Conclusions: Fully centralizing inventory achieves better service levels with lower safety stocks
if compared to a less centralized model. However, the transportation time towards customers
increases. Customers experience availability as a performance measure. Availability includes
keeping high shelf availability and short delivery times. In this thesis, a fully centralized and
a partially centralized inventory solution are further investigated. However, it is recommended
to balance the conflicting goals of providing fast delivery speed and lowering inventory. In all
investigated models fill-rate is increased by 55% if compared to the current state. In the fully
centralized model the company can achieve a higher fill-rate and at the same time lower its inventory
(cycle and safety stock) by 28 %. However, to achieve the same fill-rate in the partially
centralized model, the company is expected to increase inventory by 40 % on average if compared
to the current state. Also, the case company is expected to deliver the spare-parts quicker to the
customer in the partially centralized model when compared to the fully centralized model.}},
  author       = {{Brückner, Ruben and Higab, Jawdat}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{After-market spare parts inventory centralization at Sandvik Mining and Rock Technology.}},
  year         = {{2018}},
}