The Optimal Replenishment Schedule Model for Auto Service Parts Considering the Phase-Out Stage of Product Life Cycle
Date Issued
2009
Date
2009
Author(s)
Huang, Pei-Yi
Abstract
Recently taking a product life cycle approach toward management strategy has become a critical issue for the company. Among the management strategies regarding the product life cycle, inventory management is of great importance since the demand fluctuates significantly between different product life cycle stages, which would require different stocking policies to manage the inventory. When a product is being phased-out, the demand decreases. Therefore, the replenishment cycle and lot-size should be adjusted so as to lower the inventory level to reflect the decline in demand. The aim of this research is to propose a model to determine the optimal replenishment cycle under decreasing demand considering shortage. In the cost model, the inventory holding cost, regular order cost, lost sales cost and rush order cost are taken into account. The model is then applied to the empirical data of the automobile service parts and the optimal replenishment cycle is obtained. Further sensitivity analysis is also conducted to investigate how the cost-related and demand function-related parameters may influence the replenishment cycle. The finding showed that when the holding cost is relatively high, a single regular order will be suggested and backorder will be used. Under this scenario, the holding cost, regular order cost, backlogging ratio are negatively related to the length of period with positive inventory. Whereas,when the holding cost is relatively low, the length of period with positive inventory will equal to the replenishment cycle, which means that there is no backorder. Under this scenario, the holding cost is negatively related to replenishment cycle and the absolute value of b in the demand function is positively related to replenishment cycle.
Subjects
phase out
declining demand
replenishment schedule
Type
thesis
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