Mass customizing spare parts support services based on response time with inventory pooling strategies

Spare parts support services have received increasing management attention due to the growing number of critical systems in many business sectors. In this paper, we examine an integrated system design approach to customize spare parts support services based on response time with inventory pooling strategies. To provide customized services that meet user requirements for spare part response time, we depart from the traditional spare parts management and develop a systematic approach to design service parts support services based on axiomatic design theory. In particular, we focus on pricing discrimination decisions in service parts contracts for two-tier users under a mechanism design framework. Distinguishing between users of next-day and same-day contracts for service parts operations, we further evaluate the effect of various inventory pool structures with reserve strategies through a simulation model for the objective of cost minimization. These analytical results of this new approach provide guidance for managers in customizing spare parts support services with the holistic consideration of pricing scheme, response time, and inventory policy. Copyright © 2016 IEEE.