Spare parts supply chain supplying product

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]. 

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. 

---