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Benefits and challenges with coordinated inventory control at Volvo Parts

Borowiec, Piotr and Liedberg, Carl-Johan (2009)
Production Management
Abstract
Coordinated inventory control is a concept within inventory management
where decisions are based on stock and demand situations throughout a whole system of interconnected warehouses and inventories, and where control parameters are simultaneously determined and set at all installations.
This thesis is a part of a larger research collaboration project in coordinated
inventory control where NGiL (Next Generation Innovative Logistics), a Lund
based research institute, and Volvo Parts AB in Gothenburg participate. Volvo
Parts handles the aftermarket distribution, sales and related services for the
Volvo Group companies and has centrally controlled complex multi-level
warehouse structures and routines. These warehouse structures are... (More)
Coordinated inventory control is a concept within inventory management
where decisions are based on stock and demand situations throughout a whole system of interconnected warehouses and inventories, and where control parameters are simultaneously determined and set at all installations.
This thesis is a part of a larger research collaboration project in coordinated
inventory control where NGiL (Next Generation Innovative Logistics), a Lund
based research institute, and Volvo Parts AB in Gothenburg participate. Volvo
Parts handles the aftermarket distribution, sales and related services for the
Volvo Group companies and has centrally controlled complex multi-level
warehouse structures and routines. These warehouse structures are well suited
for a coordinated inventory control approach.
A new multi-level inventory control model has been developed by NGiL
especially for the Volvo Parts supply chain in Europe. The model utilizes
advanced mathematical concepts to mimic Volvo Parts inventory systems
consisting of several dealers and warehouses on a market. The model optimizes
the reorder points at all locations with the aim of minimizing the total costs of
the system while still maintaining or increasing today’s service to end
customers.
The purpose of this thesis is to prepare for this pilot study by analyzing the
information systems, processes, structures and routines at Volvo Parts, design
methods for extraction and calculation of the necessary parameters, select an
appropriate market and to perform a selection of suitable spare parts and
accessories to be included in the pilot study. A suitable market for the pilot
study and a method to select and classify 100 parts with all necessary
parameters are the main results of the thesis. The study is performed as an
action research project, meaning that the authors are stationed at Volvo Parts
headquarters in Gothenburg and observe the daily work, perform the necessary
data extractions from the IT systems themselves and conduct interviews on a
daily basis. The gathered data is a combination of primary and secondary
quantitative data from the IT systems and calculations, as well as a lot of
primary qualitative data from interviews and observations. The authors also
function as mediators between NGiL researchers and Volvo Parts personnel.
The developed model is concluded to be a good representation of the reality of
Volvo Parts’ supply chain on the selected market Spain, and the authors do not
see any large obstacles in a generalization to other Volvo Parts markets with
the same structure or even other companies. The one major discrepancy
between the NGiL model and current Volvo Parts control methods is how
service levels are measured and how goals on these service levels are achieved.
We have also performed a simulation study for some of the selected parts and
found that the potential for cost reductions is significant and that the
optimized solution fulfills target service levels in almost all cases. We also
found out that there are no clear correlations or patterns between the cost
reduction and any of the part characteristics that were studied, implying that a
larger simulation study or a real life pilot study is necessary in order to further
investigate the full potential of the NGiL model. (Less)
Please use this url to cite or link to this publication:
author
Borowiec, Piotr and Liedberg, Carl-Johan
supervisor
organization
year
type
M1 - University Diploma
subject
other publication id
5334/09
language
English
id
1978128
date added to LUP
2011-06-16 16:09:50
date last changed
2011-06-16 16:09:50
@misc{1978128,
  abstract     = {Coordinated inventory control is a concept within inventory management
where decisions are based on stock and demand situations throughout a whole system of interconnected warehouses and inventories, and where control parameters are simultaneously determined and set at all installations.
This thesis is a part of a larger research collaboration project in coordinated
inventory control where NGiL (Next Generation Innovative Logistics), a Lund
based research institute, and Volvo Parts AB in Gothenburg participate. Volvo
Parts handles the aftermarket distribution, sales and related services for the
Volvo Group companies and has centrally controlled complex multi-level
warehouse structures and routines. These warehouse structures are well suited
for a coordinated inventory control approach.
A new multi-level inventory control model has been developed by NGiL
especially for the Volvo Parts supply chain in Europe. The model utilizes
advanced mathematical concepts to mimic Volvo Parts inventory systems
consisting of several dealers and warehouses on a market. The model optimizes
the reorder points at all locations with the aim of minimizing the total costs of
the system while still maintaining or increasing today’s service to end
customers.
The purpose of this thesis is to prepare for this pilot study by analyzing the
information systems, processes, structures and routines at Volvo Parts, design
methods for extraction and calculation of the necessary parameters, select an
appropriate market and to perform a selection of suitable spare parts and
accessories to be included in the pilot study. A suitable market for the pilot
study and a method to select and classify 100 parts with all necessary
parameters are the main results of the thesis. The study is performed as an
action research project, meaning that the authors are stationed at Volvo Parts
headquarters in Gothenburg and observe the daily work, perform the necessary
data extractions from the IT systems themselves and conduct interviews on a
daily basis. The gathered data is a combination of primary and secondary
quantitative data from the IT systems and calculations, as well as a lot of
primary qualitative data from interviews and observations. The authors also
function as mediators between NGiL researchers and Volvo Parts personnel.
The developed model is concluded to be a good representation of the reality of
Volvo Parts’ supply chain on the selected market Spain, and the authors do not
see any large obstacles in a generalization to other Volvo Parts markets with
the same structure or even other companies. The one major discrepancy
between the NGiL model and current Volvo Parts control methods is how
service levels are measured and how goals on these service levels are achieved.
We have also performed a simulation study for some of the selected parts and
found that the potential for cost reductions is significant and that the
optimized solution fulfills target service levels in almost all cases. We also
found out that there are no clear correlations or patterns between the cost
reduction and any of the part characteristics that were studied, implying that a
larger simulation study or a real life pilot study is necessary in order to further
investigate the full potential of the NGiL model.},
  author       = {Borowiec, Piotr and Liedberg, Carl-Johan},
  language     = {eng},
  note         = {Student Paper},
  title        = {Benefits and challenges with coordinated inventory control at Volvo Parts},
  year         = {2009},
}