Service Parts Management: Theoretical Foundations, Practice, and Opportunities

After sales service is a critical component of any firm’s customer acquisition and retention strategy, especially when the products are capital intensive, such as in aerospace and defense, heavy manufacturing, telecommunications, construction equipment, medical devices, process industry, consumer electronics, transportation, and semi-conductor equipment industries. These products are often deployed in mission critical environments, which makes ensuring uptime of these assets critical. Therefore, manufacturers of such products often sell service contracts designed to ensure consistent availability of these assets. Consequently, design and management of the infrastructure needed to deliver such services, also called as the service supply chain, is an extremely important topic for practitioners. Not surprisingly, a significant body of research has emerged in the operations management literature to address the underlying analytical challenges. Distinct attributes of the assets and parts needed to provide service, ways in which demand for service parts occurs and can be satisfied, definition of customer service, and the network of physical locations from where demand can be fulfilled make the underlying analytical problem particularly challenging, and, therefore, exciting for academic researchers. This chapter reviews the key foundational concepts related to the design and management of the inventory strategy needed to provide cost-effective service in spares parts management (SPM) systems. It also provides a brief description of the software solutions provided by some of the major software vendors in the SPM space. It concludes with a brief summary of some of the most exciting trends in this arena that could lead to opportunities for further research by academics and enhancements by industry solutions providers.