Managing Inventory Of Items with Replacement Warranty Vidyadhar Kulkarni * Joint Work with Wei Huang...

transcript

Managing Inventory Of Items with Replacement Warranty

Vidyadhar Kulkarni*

Joint Work with Wei Huang**, Jayashankar Swaminathan*

* University of North Carolina at Chapel Hill**SAS Inc. Cary, NC

Warranty?!

Motivation• Digital projector company:

electrical, mechanical and optical parts.

New Demand

Demand fromNew Customer

Demand for Warranty Repairs

Demand forWarranty Repair

•The demand for warranty repairs is significant compared to the new demand. (More than 15% in some periods.)

Current Policy

• The inventory replenishment strategy of the digital projector company: make inventory control policy depending on the new demand alone, and satisfy the warranty repair demand by inventory left on hand.– Suffers the high penalty cost for unsatisfied

demand of warranty repair, which directly causes shortage of inventory for new product demand as well.

• Manage the complex service parts challenges with a costly, “just order more parts” strategy.

Research Questions

• Develop an integrated inventory policy to simultaneously account for new and warranty parts

• Discounted cost and long-run average cost• Backlogging and emergency supply• Benefits of tracking the age of items under

warranty• Evaluate the cost benefits of such approaches

Model Settings

warranty expiration ratio warranty duration K

backlogs emergency supply backlogs emergency supply

finite discounted

infinite discounted

long-run average

finite discounted

infinite discounted

long-run average

finite discounted

age-independent failure age-dependent failure

Problem Structure

Manufacturer(w,x)

CustomerCustomer

Customer

Customernew product

Out of warranty

demand for new productdemand for warranty repairproduct warranty expires

? how much to order

failed product

product out of warranty

Model Parameters

Model Description and Assumptions

Proportional Model with Discounting (Finite Horizon)

Special Case: i.i.d Demand

Proportional Model with Discounting (Infinite Horizon)

Proportional Model Average Cost

Proportional Model with Emergency Supply

Extensions: Pro-rata Policy

Extensions: Warranty Expiration Model

Computational Study: Cost Improvement

c=2, h=0.05, N=100, N=1000

C_standard

edC_integratC_standard

Cost Improvement for Different Failure Rate

0.01 0.05 0.1 0.15 0.2 0.25 0.3

Failure Rate

Computational Study: Cost Improvement

Cost Improvement with Stock-Out Penalty Cost

8 10 12 15 20 25 30

Stock-Out Penalty Cost

beta=0.01

beta=0.05

beta=0.1

Computational Study: Value of Information• Integrated policy VS. Approximate policy

• Approximate policy: base stock policy with base stock level

• Maximum improvement: 12.3%; Average improvement: 3%

Computational Study: Value of Information

Managing Inventory Of Items with Replacement Warranty Vidyadhar Kulkarni * Joint Work with Wei Huang...

Documents