A time-based order fill rate model for spare parts

Postgraduate

Abstract

The service central warehouse at Vanderlande holds a number of spare parts on stock to fill customer orders for spare parts. In this research the supply chain of spare parts at Vanderlande is analyzed and subsequently an inventory model for the service central warehouse is developed that optimizes the percentage of customer orders that is completely filled within a given timeframe, with respect to the total holding costs. Real life data has been entered into the model and resulted in significant improvements in both holding costs and order fill rate in comparison with the current stock levels.

Introduction

In this chapter a brief description is given of the company and the department in which this research is conducted. In section 1.2 the research questions and goals are formulated.

 Company description

Vanderlande Industries was founded in 1949 as “Machinefabriek E. van der Lande” in Veghel, the Netherlands. At that time it was a general machinery and construction company which manufactured hoists, cranes and conveyor equipment for bulk material handling and oil drums. Through joint ventures and establishments the company has grown to a multinational company. Today, Vanderlande Industries has over 1800 employees in four continents. Its headquarters and factory where parts are being produced are still located in Veghel.

Vanderlande Industries’ activities can be divided into four categories or business areas:

       Baggage handling: Vanderlande Industries designs, builds and services baggage handling systems for airports of all sizes. These systems are located at several major international airports such as Schiphol Airport, London Heathrow and Hong Kong Int. Airport.

       Distribution: Vanderlande Industries provides automated handling systems for order selection and sorting in distribution centers. These systems are installed at amongst others Daimler, PLUS retail and Amazon.de.

       Parcel & Post: Vanderlande Industries offers a wide range of technologies for parcel handling and documents. The system size varies from some thousands parcels per day up to 100,000 parcels per hour. Customers with parcel & post systems are amongst others UPS, TNT and DHL.

       Services: The services Vanderlande Industries provides vary from preventive and corrective maintenance to complete spare part deliveries from a ‘one-stop-shop’ and operation and process support through e.g. training.

Due to increasing worldwide competition and shrinking profit margins, high-technology-product manufacturers are forced to find new ways to differentiate themselves from their competitors. Providing a fast, high-quality after-sales service to customers can help to achieve this. Therefore, service is becoming an increasingly important activity for Vanderlande. Besides, as opposed to the other business areas where turnover is generated through projects, service generates a more continuous cash flow through service contracts. This improves the continuity of the company, which is important especially in the current global economic situation.

Research goals

There are two main goals in this research.

       Provide insight in the spare parts supply chain.

To take maximum advantage of the SCW, we need to understand the spare parts supply chain. Which demand streams are applicable at the SCW, and what performance is desired for each stream?

       Develop a stock policy that optimizes the performance of the SCW.

It is the intention of the SCMS department to use the stock at the SCW to both improve the delivery performance – i.e. on time delivery – and to reduce the lead times on customer orders for spare parts. We need to address the following:

                                              What performance is exactly desired by customers and Vanderlande?

                                              How do the stock levels at the warehouse influence this performance?

Vanderlande intends to implement the stock policy that results from this research. Part of this goal is hence to deliver a usable tool that applies the developed policy.