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Coordinated inventory control and customer service performance at Volvo Parts

Alfredsson, Andreas and Hansson, Patrik (2011) MIO920
Production Management
Abstract
This master thesis is a part of an inventory control research
collaboration between NGIL (Next Generation Innovative
Logistics) and Volvo Parts AB. Volvo Parts is a business unit within
the Volvo Group that provides support and services for the
aftermarket. Their objective is to maximise the uptime of Volvo
Group products for the end users by providing support and
ensuring availability of spare parts. The purpose of the
collaboration is to investigate the potential of coordinated control
in Volvo Parts’ distribution structure. Prior studies within the
project have indicated potential for significant reductions of
inventory related costs while fulfilling determined target service
levels to customers. This thesis is a continuation... (More)
This master thesis is a part of an inventory control research
collaboration between NGIL (Next Generation Innovative
Logistics) and Volvo Parts AB. Volvo Parts is a business unit within
the Volvo Group that provides support and services for the
aftermarket. Their objective is to maximise the uptime of Volvo
Group products for the end users by providing support and
ensuring availability of spare parts. The purpose of the
collaboration is to investigate the potential of coordinated control
in Volvo Parts’ distribution structure. Prior studies within the
project have indicated potential for significant reductions of
inventory related costs while fulfilling determined target service
levels to customers. This thesis is a continuation of the project and
aims to evaluate the potential benefits further.
Excellent customer service involves more than providing sufficient
availability of articles. Customer expectations and requirements
are today higher than ever before, much due to the ease of access
of products and services from companies all over the world.
Enhancing customer service has become a way for companies to
differentiate themselves and to gain competitive advantages. This
thesis aims to identify what areas Volvo Parts should focus on in
order to improve their service to customers.
Objective The objective of this master thesis is to evaluate the potential of
coordinated inventory control at Volvo Parts and to investigate
possible improvements of the company’s customer service.
Methodology To handle the diverse objectives of this thesis a mixed method
approach is employed. A qualitative study of customer service is
performed through a literature review and a series of interviews
and potential benefits of coordinated inventory control are
evaluated through quantitative simulations. A link between the
qualitative and quantitative research exists since the interview
study also aims to provide insights that strengthen the evaluation
of the simulation study.
Conclusions The most important areas for Volvo Parts to focus on in order to
improve their customer service are information, reliability and
access. These dimensions all hold considerable potential to
enhance the customers’ perceptions of the service. When
discussing and preparing actions for improvement, Volvo Parts
should also consider efforts concerning empathy. This report
presents hands‐on suggestions for improvements in the
mentioned areas.
Today Volvo Parts uses several different measurements, some of
which are related to customer service. To help the organisation to
achieve a more thorough indication of their performance in the
area and to strengthen the connection to the customers’
perceptions this report also presents some complementary and
alternative customer service oriented metrics, the most important
being:
Perfect order fulfilment
Modification of the current metric Dealer Service Index
VOR leadtime
The simulation study indicates that the NGIL inventory control
model holds significant cost reduction potential. The results show
a decrease in total cost by more than 25% compared to Volvo
Parts’ current solution. Unfortunately the NGIL model rendered
some solutions that appear to be unrealistic stockholding policies
to implement in practice. By modifying the assumptions behind
the model we received a more logical solution and an improved
service level at the expense of a slightly smaller cost reduction.
This favourable result indicates that relatively minor adjustments
of the model can increase its suitability substantially.
Our recommendation is an implementation of the model in a pilot
study preceded by a revision of the calculations of the cost
parameters used as input to the model, since we believe these
currently limit the solutions. A more detailed adjustment of the
assumptions would probably also be useful. In conclusion, we
believe that the NGIL model can be of great use for Volvo Parts if
utilised correctly. (Less)
Please use this url to cite or link to this publication:
author
Alfredsson, Andreas and Hansson, Patrik
supervisor
organization
course
MIO920
year
type
M1 - University Diploma
subject
keywords
Coordinated inventory control, simulation, customer service
other publication id
11/5384
language
English
id
1969349
date added to LUP
2011-06-16 16:08:26
date last changed
2011-06-20 12:44:48
@misc{1969349,
  abstract     = {This master thesis is a part of an inventory control research
collaboration between NGIL (Next Generation Innovative
Logistics) and Volvo Parts AB. Volvo Parts is a business unit within
the Volvo Group that provides support and services for the
aftermarket. Their objective is to maximise the uptime of Volvo
Group products for the end users by providing support and
ensuring availability of spare parts. The purpose of the
collaboration is to investigate the potential of coordinated control
in Volvo Parts’ distribution structure. Prior studies within the
project have indicated potential for significant reductions of
inventory related costs while fulfilling determined target service
levels to customers. This thesis is a continuation of the project and
aims to evaluate the potential benefits further.
Excellent customer service involves more than providing sufficient
availability of articles. Customer expectations and requirements
are today higher than ever before, much due to the ease of access
of products and services from companies all over the world.
Enhancing customer service has become a way for companies to
differentiate themselves and to gain competitive advantages. This
thesis aims to identify what areas Volvo Parts should focus on in
order to improve their service to customers.
Objective The objective of this master thesis is to evaluate the potential of
coordinated inventory control at Volvo Parts and to investigate
possible improvements of the company’s customer service.
Methodology To handle the diverse objectives of this thesis a mixed method
approach is employed. A qualitative study of customer service is
performed through a literature review and a series of interviews
and potential benefits of coordinated inventory control are
evaluated through quantitative simulations. A link between the
qualitative and quantitative research exists since the interview
study also aims to provide insights that strengthen the evaluation
of the simulation study.
Conclusions The most important areas for Volvo Parts to focus on in order to
improve their customer service are information, reliability and
access. These dimensions all hold considerable potential to
enhance the customers’ perceptions of the service. When
discussing and preparing actions for improvement, Volvo Parts
should also consider efforts concerning empathy. This report
presents hands‐on suggestions for improvements in the
mentioned areas.
Today Volvo Parts uses several different measurements, some of
which are related to customer service. To help the organisation to
achieve a more thorough indication of their performance in the
area and to strengthen the connection to the customers’
perceptions this report also presents some complementary and
alternative customer service oriented metrics, the most important
being:
Perfect order fulfilment
Modification of the current metric Dealer Service Index
VOR leadtime
The simulation study indicates that the NGIL inventory control
model holds significant cost reduction potential. The results show
a decrease in total cost by more than 25% compared to Volvo
Parts’ current solution. Unfortunately the NGIL model rendered
some solutions that appear to be unrealistic stockholding policies
to implement in practice. By modifying the assumptions behind
the model we received a more logical solution and an improved
service level at the expense of a slightly smaller cost reduction.
This favourable result indicates that relatively minor adjustments
of the model can increase its suitability substantially.
Our recommendation is an implementation of the model in a pilot
study preceded by a revision of the calculations of the cost
parameters used as input to the model, since we believe these
currently limit the solutions. A more detailed adjustment of the
assumptions would probably also be useful. In conclusion, we
believe that the NGIL model can be of great use for Volvo Parts if
utilised correctly.},
  author       = {Alfredsson, Andreas and Hansson, Patrik},
  keyword      = {Coordinated inventory control,simulation,customer service},
  language     = {eng},
  note         = {Student Paper},
  title        = {Coordinated inventory control and customer service performance at Volvo Parts},
  year         = {2011},
}