Optimal Order Timing and Quantity of Final Replenishment for Auto Service Parts Inventory

For many companies which provide after-sales service, to meet customer demand for service parts is very important. Especially in the automotive industry, international automobile companies usually require local agents to provide after-sales service through their channels, because for the upstream firms, it’s difficult to directly provide after-sales service to satisfy individual local market. But the periods for maintenance and replacement of the service parts are usually much longer than vehicle’s production periods, the service parts requirement will need to stock for a certain period of time even after the vehicle manufacturer stops producing the car. The period after the vehicle stops production is called the end-of-life service period. In this period, service parts suppliers will not continue to produce until the end of this period, because scale economies of quantity remains mainly concerned. Therefore, the agents need to decide the best final order timing and quantity to satisfy the service levels and cost restrictions.
In light of these concerns, the aim of this research is to provide a useful decision-making model to help the agents to make the right decision about final orders. Firstly, this study will use the negative exponential model to obtain a better demand forecast, and construct a cost model to determine the optimal final order timing and quantity by using the demand forecast. Inside this cost model, the regular order cost, rush order costs, lost sales costs and inventory holding costs are taken into account. Then, A special algorithm is develop for the model to obtain the optimal solution. Finally, the real data form company T were incorporated to compare the decision-making model with current practice of company T. The result shows our model reduces cost efficiently and effectively meets customer needs.