Comparing single- and multi-echelon methods for inventory control of spare parts at Volvo

Sammanfattning: Title: Comparing single- and multi-echelon methods for inventory control of spare parts at Volvo Authors: Jakob Bengtsson & Alexander Larsson Supervisors: Johan Marklund, Lund University | Christian Beckers & Johan Lid- vall, Volvo Background: Spare parts logistics is an area particularly concerned with challenges related to inventory control. The parts are vital to secure the functionality of critical equipment and the management of its supply chain tends to be complex. This thesis will focus around the inventory control of spare parts distribution within the Volvo group. Currently, the case company is using a single-node optimization approach in their inventory control process and the company is interested in improvements to their current process. Literature in the subject shows promising results when using multi-echelon approaches in inventory control. Thus, this thesis will study the effects of using a multi-echelon approach in the inventory control process at Volvo. Purpose: The purpose of this thesis is to evaluate the use of a multi-echelon model in comparison to the currently used single-echelon model at Volvo. Methodology: The thesis follows an operations research framework where first quantitative and qualitative data regarding the problem was gathered. Then, the inventory system was modeled in a computer program using a multi-echelon ap- proach. Lastly, the performance of the model was evaluated through a numerical study using discrete-event simulation. Conclusions: In this thesis, two sets of spare parts governed by two different single-echelon based models are examined. For the first set, using the multi-echelon model results in a reduction of average cost by 67 %. For the same set, the multi-echelon model also outperforms the single-echelon model in terms of meeting target service levels. For the other set, an average of 22 % cost reduction is achieved. For this set, the single- and multi-echelon model perform equally satisfactory in terms of meeting target service levels, however, the multi-echelon model provided reorder points that results in a lower total amount of stock-on-hand. The model mainly managed this by suggesting a set of reorder point allocating stock further downstream in the supply chain. Thus, the system faced a slight increase in stock at the dealers while experiencing a large reduction of stock at the RDC.