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A Major Appliance Manufacturer Rethinks Its Inventory Policies for Service Vehicles

Department of MIS, Operations Management and Decision Sciences, School of Business Administration, University of Dayton, 300 College Park, Dayton, Ohio 45469-2130
Moore School of Business, University of South Carolina, Columbia, South Carolina 29208
michael.gorman{at}udayton.edu
ahire{at}moore.sc.edu

A major appliance manufacturer needed to effectively manage $7 million in inventories of repair and replacement parts housed in more than 1,300 service vehicles used for warranty repairs. The manufacturer wanted to optimize the inventories while ensuring that its technicians carried the parts they needed to repair customers’ appliances on the first visit. Typically, service vehicles carry only 400 of the 70,000 parts stocked centrally. Thus, the appropriate composition of vehicle stock is essential to attain acceptable levels of service and costs. We developed and applied an intuitive, efficient, effective, and easy-to-implement heuristic solution to this vehicle-stocking problem and found that the firm could trim more than $3 million per year from its warranty repair costs and increase its first-visit repair rate from 86 percent to 90 percent. The results of a pilot study supported these findings, and we estimated a payback of less than two years on full-scale implementation. The manufacturer is implementing these improved vehicle-stocking policies across its national network.

Key Words: inventory; production; policies; industries; appliance

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