After-market spare parts inventory centralization at Sandvik Mining and Rock Technology.

Sammanfattning: Background: In spare parts logistics, customers expect a high availability of spare parts from their providers. It is very critical for spare parts providers to be able to satisfy customers’ demands. It acts as a differentiator in the customer’s buying decision. Sandvik, an engineering company, is interested in improving their spare parts logistics. The case company is interested in benefits from centralizing their inventory. They target increasing their inventory service levels, while at the same time, having a feasible solution. Inventory centralization is thought of interest because of the risk pooling benefits that lowers the demand uncertainty. Thus, higher service levels can be achieved with lower global safety stocks. Purpose: The purpose of the thesis is to investigate, model and analyze a centralized spare parts inventory solution for the case company. Methodology: Mathematical modeling of single-echelon, single item inventory systems using Visual Basic for Applications within Microsoft Excel is a core method for this thesis. All data were collected from the case company. Quantitative data was the dominant type of data to be used. However, qualitative data complemented the quantitative one where necessary. The thesis follows an abductive approach but with an emphasis on deductive methods. Conclusions: Fully centralizing inventory achieves better service levels with lower safety stocks if compared to a less centralized model. However, the transportation time towards customers increases. Customers experience availability as a performance measure. Availability includes keeping high shelf availability and short delivery times. In this thesis, a fully centralized and a partially centralized inventory solution are further investigated. However, it is recommended to balance the conflicting goals of providing fast delivery speed and lowering inventory. In all investigated models fill-rate is increased by 55% if compared to the current state. In the fully centralized model the company can achieve a higher fill-rate and at the same time lower its inventory (cycle and safety stock) by 28 %. However, to achieve the same fill-rate in the partially centralized model, the company is expected to increase inventory by 40 % on average if compared to the current state. Also, the case company is expected to deliver the spare-parts quicker to the customer in the partially centralized model when compared to the fully centralized model.