On sourcing and stocking policies in a two-echelon, multiple location, repairable parts supply chain

Abstract

This research develops policies to minimize spare part purchases and repair costs for maintaining a fleet of mission-critical systems that operate from multiple forward (base) locations within a two-echelon repairable supply chain with a central depot. We take a tactical planning perspective to support periodic decisions for spare part purchases and repair sourcing, where the repair capabilities of the various locations are overlapping. We consider three policy classes: a central policy, where all repairs are sourced to a central depot; a local policy, whereby failures are repaired at forward locations; and a mixed policy, where a fraction of the parts is repaired at the bases and the remainder is repaired at the depot. Parts are classified based on their repair cost and lead time. For each part class, we suggest a solution that is based on threshold policies or on the use of a heuristic solution algorithm that extends the industry standard of marginal analysis to determine spare parts positioning by including repair fraction sourcing. A validation study shows that the suggested heuristic performs well compared to an exhaustive search (an average 0.2% difference in cost). An extensive numerical study demonstrates that the algorithm achieves costs which are lower by about 7–12% on average, compared to common, rule-based sourcing policies.

Keywords:

• supply chain
• repairable parts
• sourcing
• two-echelon

Electronic supplementary material

The online version of this article (doi:10.1057/s41274-016-0108-0) contains supplementary material, which is available to authorized users.

Electronic supplementary material

The online version of this article (doi:10.1057/s41274-016-0108-0) contains supplementary material, which is available to authorized users.