After Sales Service: Simple Theory-Informed Inventory Management Solutions

According to the 22nd Annual State of Logistics report which was recently published, the world is currently sitting on approximately $8 trillion worth of inventories. About 10%-15% of that value relates to service/spare parts, rendering (amongst other reasons) the area of after sales service one of strategic importance for most organisations nowadays. The tremendous monetary investments in spare parts availability imply that very small improvements in the way these items are managed may be translated to substantial savings with considerable implications for the economy as a whole. In addition, there are considerable environmental implications in this area since one of the main problems associated with the after-sales industry is that of obsolescence and the environmentally responsible disposal of ‘dead’ stock. We consider the difficulties associated with managing spare part inventories and we present the state-of-the-art solutions in managing such items. We draw upon a number of real world case studies to demonstrate the considerable gap between theory and practice in this area and the fact that simple well-informed solutions may account for considerable benefits. The discussion and methods presented relate explicitly to all slow moving inventory settings (since spare parts are characterised by slow movement). We close with an agenda for further work in this area.