Spare parts supply chain

In many industries, the provision of spare parts and associated services represents a significant component of supply chain profits. Some studies [23] estimate US sales of spare parts and after-sales services to be 8% of the annual gross domestic product (GDP) or 1 trillion. Others [28] surest, for example, that in 2001, General Motors earned relatively more profits from its 9 billion in after-sales revenues than it did from 150 billion in car sales. Another estimate [124] suggests that the total cost of ownership of a product may far exceed the amount spent on the initial product purchase and may vary between five and twenty times the original product cost. The main conclusion from these studies is that managing spare parts supply chains and related services after a product is sold may have a significant impact on both primary demand as well as on profits. 

Information such as yield, energy consumption or personal costs helps to overview a process continuously during operation and to deal with spare parts and raw materials. This so-called supply chain management is now widely accepted. The predominant supplier of business software SAP claims to have given more 21 000 licenses to companies which use their management tools for business and production management [27]. 

Spare Parts and the Four CS of Supply Chain Management... 

Chapters on coordination provides a description of the spare parts inventory supply chain at the US Coast Guard (USCG) [27]. We summarize the specific features of the spare parts system and the changes made to improve performance. The main supply chain support for air assets for the Coast Guard is the Aircraft Repair and Supply Center (ARSC) located in Elizabeth City, NC. Aircraft failures in the airstations are often tracked to part failures. Those parts are replaced with working parts from field inventory at the air station and the salvageable broken components are shipped to ARSC for repair. In turn, ARSC replenishes field inventory. 

Consider a supply chain with two spare-parts demand stations that face a daily demand for a part that follows a normal distribution with a mean (fx) of 50 and a standard deviation (cr) of 25. Assume that the parts stations face a replenishment cost (K) of 125, a holding cost (h) of 0.2/day/part, a backorder cost (h) of 5/day/part. Also, suppose each station faces a supply lead time (Z) of 3 days to be replenished by the... 

It is clear that the cost associated with inventory depends on the variance of demand during lead time. In such a case, the larger the demand variance, the greater the effect of lead time on safety stock. Now suppose orders to a fadlity came from two sources that differ in their demand variability. Suppose we provide priority to the higher demand variance orders and low priority to the low demand variance order what is the impact Note that, as shown analytically and illustrated with a numerical example in Chapter 4 on capacity management, if one set of orders receives a priority, the lead time for those orders will decrease. But, since the capacity level is unchanged, the lead time for the lower priority orders will increase. Thus, priorities are one mechanism to offer differentiated lead times across order streams and thus improve supply chain performance for spare parts. 

The planned and established specialised supply chain for the companies can enable them to improve their overall competencies. However, in particular, it should allow them to focus on their core competencies—i.e. concentrate on production with safety and pollution control, while supplies of non-critical raw materials (filter aids, salt for water treatment, some stabiliser chemical), common spare parts, and packaging items are outsourced. 

There are many dangers in ignoring SCM as a discipline. The most serious is the loss of prohtable customers. The hypothetical supply chain in Figure 2.1 illustrates the physical movement of products through a traditional network. The flow begins with several suppliers. They send raw material to a factory. Other material that requires no conversion or supports the aftermarket as spare parts goes directly to warehouses that ship to customers. The factory outbound shipments supply a distribution center and regional warehouses. The distribution center and warehouses, in turn, support customer demand. 

Actual case 2.4 In 1999, a massive earthquake devastated Taiwan. Initially, 80 % of the islands power failed. Companies such as Hewlett-Packard and DeU, most of whose spare parts were from Taiwan manufacturers, were impacted by supply interruptions. Similarly, the snow disaster occurred in 2008 in China also resulted in paralysis of supply chain, and therefore many enterprises suffered heavy losses [9]. 

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