A Model for Designing Multi-Echelon
Inventory
Networks with Finite Repair Capacity
Ben D. Van Roo
When
designing a multi-echelon supply chain network to satisfy customer requirements
for reparable parts that balances cost efficiency with effectiveness, several
decisions must be made. Some of these decisions are strategic and establish the
basic infrastructure of the supply chain. Such strategic decisions include: How
many repair facilities are needed to support the system and meet customer requirements?
How much capacity, in terms of equipment and labor, are needed at each repair facility?
Where should these facilities be located? Which field stocking locations (or
customer service centers) should be served by which repair facilities? While
there are many other additional strategic questions, the few that we have
listed are themselves not easy decisions to make. They are not easily changed
and can establish the basic operational environment for years. Moreover, they must
be robust to contend with a constantly changing environment and customer
requirements. The alternatives to these
strategic decisions will have both tactical and operational consequences in
terms of cost and responsiveness. Some tactical and operational consequences
are: What will the transportation costs be of a supply
chain design? How much inventory and working capital will be necessary to
support customer requirements? Does sufficient inventory even exist to support customer
requirements associated with a particular supply chain design? The answers to
these questions fundamentally depend on the structure and design of the supply
chain…