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n
=inventory position at the beginning of period n
after ordering.
Y
n
=net stock at the end of period n.
S =order-up-to level.
c
l
=holding cost per item per time.
c
|
=back-order cost per item per time.
t =order lead time.
We assume (D
n
) to be a sequence of indepen-
dent, identically distributed random variables with
E[D
n
] > 0. Then, (
n
) forms a Markov chain with the
following transition rule:
n+1
=max(S,
n
D
n
).
Moreover, we have the relation
Y
n
=
nt
i=0
D
ni
,
where the two operands on the right-hand side are
independent. This allows us to evaluate the long-run
average system costs, dened as
lim
n
E|c
l
max(0, Y
n
) +c
|
max(0, Y
n
)].
Parameter settingsFigure 4
D
n
=D
+
n
D
n
.
D
+
n
Poisson(10).
D
n
Poisson(\), with \ [0; 9.75].
c
l
=$1/item/period.
c
|
=$50/item/period.
t =5.
Parameter settingsFigure 5
Part-demand process (unit/month): Poisson(100).
Part-return probability: 0.8.
Machine-return-batch arrival (unit/month):
Poisson(8.569).
Machine-return-batch size: Uniform|1, 10].
Test yield after dismantling: 0.7.
Repair yield: 0.5.
Lead time for new-buys: 2 months.
Lead time for repairs: 1.5 months.
Lead time for dismantling: 0.25 months.
Unit order cost for new-buys: $100.
Interfaces
Vol. 33, No. 6, NovemberDecember 2003 55
FLEISCHMANN, VAN NUNEN, AND GRVE
Spare-Parts Management at IBM
Unit repair cost: $50.
Unit dismantling cost: $40.
Unit stockout cost: $110.
Annual holding-cost rate: 20%.
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Daniel H. Ransdell, Vice President Hardware
Service & Support, IBM Corporation, 3039 Cornwallis
Road, Research Triangle Park, North Carolina 27709,
writes: As the worldwide executive for Hardware
Service & Support in IBM Corporation, I fully support
the referenced article. The project as described and
executed in co-operation with the team from Erasmus
University in The Netherlands has been valuable to
our organization. The article also helped to validate
our current parts strategy and, as you know, IBM has
been very active in the eld of Reverse Logistics.
The efciency of our Spare Parts Management in
IBM is very important in support of our customer
satisfaction and the nancial performance of our
Services business. As described in the article, the
authors systematic analysis has helped us to assess
different alternatives for structuring our re-utilization
process and has helped us to address the proper IT
system requirements. This process involves dozens of
warehouses and repair sites worldwide, thus truly a
global operation.
56
Interfaces
Vol. 33, No. 6, NovemberDecember 2003