Comparing Different Service Parts Distribution Network Configurations to Evaluate the Effect on Logistics Costs

In this research project, conducted at Philips in Best, we compared different Service Parts Distribution Network (SPDN) con gurations in terms of total logistics costs. Total logistics costs includes inventory holding costs and transportation costs for shipments from DC to customer. With respect to the con guration of a SPDN we considered the number of Distribution Centers (DC-s), their geographical location and the allocation of customer demands to these DC-s. An inventory-transportation model, based on the model of Kranenburg and Van Houtum (2009), has been developed which can be used to compare different SPDN con gurations. The inventory-transportation model has been used in two case studies to compare the current SPDN con guration with an alternative SPDN con guration. A greedy algorithm is used to optimize stock levels such that the total logistics costs are minimized under the restriction that at least 95% of the aggregate demand for requested service parts is delivered Next Business Day.

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