There are many requirements involved in the supply
chain management (SCM) of service and replacement parts that make the
process different from traditional, “new parts” SCM (see Part
One). As a result, some specialist SCM solutions have been developed to
address these challenges. Some might resemble conventional SCM solutions, but
feature different approaches. The requirements of service and replacement parts
SCM solutions also vary given the wide range of members that exist across
multi-node supply chains. Each of these members can be grouped into a few major
solution functional categories.
Part Two of the Lucrative but Risky “Aftermarket” Business:
Service and Replacement Parts SCM series.
Service and replacement parts resource management, which is the
main focus of this article, consists of a variety of solutions that are
comparable to supply chain planning (SCP) components in conventional
SCM suites. Service and replacement parts management has inventory
optimization at its core that determines the best way to stock inventory
across the supply chain to maximize service levels while minimizing investment.
In other words, the basic goal is to maintain the optimal placement of
resources, including parts, tools, and service technicians, across service
regions to meet service level agreement (SLA) commitments at the lowest
possible cost.
These
spare parts planning systems provide the means to define and implement a spare
parts inventory strategy that meets enterprise objectives. In other words, they
tend to help enterprises understand the relationship between a customer service
target level and the value of the inventory required to support it. To that end,
they combine forecasting with replenishment logic to determine the optimal level
and mix of parts to carry at each stocking tier, given certain capital
investment targets and customer service level goals. Unlike finished goods,
where nearly 100 percent customer service levels are desirable, here only
certain classes of spare parts need to be available all the time, at all supply
chain nodes.
Spare
parts planning systems might also improve user productivity, since by automating
the basic forecasting and replenishment process, planners and inventory managers
can focus on exceptions and more-strategic planning activities, such as how to
handle expensive, slow-moving items or how to use substitute parts to reduce
costs or obsolescence.
Achieving this goal requires a mix of tools. These range from strategic
tools identifying demand profiles, service objectives, and the best way to
position resources to meet demand, to tactical tools determining what orders
need to be placed to meet strategic objectives. Such goals include managing the
risk inherent in allocations and transships; repair or new purchase orders;
new product introductions (NPI) or discontinuations; and the
replenishment and redeployment decisions.
Tactical
refinements of inventory optimization entail setting minimum and maximum
inventory levels, which recognizing stochastic, chaanging demand and lead-time.
The algorithms required to provide this support are significantly different from
those found in conventional, new parts production SCM, and justify the use of
focused, point solutions, including dynamic programming, simulation, mixed
integer optimization, etc. In the case of inventory optimization, two parts may
be present:
