Sourcing And Inventory Management Models For End-of-Life Products

The end-of-life(EOL)problem describes the phenomenon that the regular supply of some parts is discontinued permanently earlier than the end of the whole life cycle of the products that contain the parts.It usually occurs in the decline stage of product life cycle.In this problem,the stable supply of parts is not available when they enter the final phase of their life cycles,whereas products manufacturers still need to provide aftersales service and(or)make new products.Thus a serious mismatch of parts supply and demand arises.The problem is frequently observed in many industries,and has received considerable attention from both practitioners and academics in recent years.In this dissertation,we study several research problems on the solutions of the EOL problem.First,we consider a manufacturer who faces the parts EOL problem when its products are still on sale in the market.This phenomenon is common for many industrial goods manufacturers.One specific part with discontinued supply is used in both new products manufacturing and after-sales service provision.The firm mainly utilizes two approaches to resolve the EOL problem: Product design refresh,which facilitates an alternative component with ample supply to be used as a substitute and solves the problem permanently with considerable investment costs;Parts inventory control,which depends on the original part with diminishing supply over time.We establish an optimal stopping model with additional decisions to investigate when redesign should be initiated and how parts inventory should be adjusted accordingly.We show that a threshold policy is optimal for the former decision,and well-structured policies including the target interval policy are applicable for the latter.Numerical studies show that the adoption of product design refresh in complementing parts inventory control brings considerable benefits.We further develop a heuristic policy which performs well in many cases.We then focus on a scenario when a manufacturer's products enter the final phase of life cycles,the supply of certain parts is also stopped.Such EOL problem often exists in consumer products industries.The manufacturer can jointly apply solutions like last-time buy,parts remanufacturing and extra procurement to maintain parts supply as spares in warranty service.A stochastic dynamic programming model is formulated to describe the firm's inventory decisions,in which the interconnections among installed base,product returns and spare parts demand are clearly modeled.We find that the optimal policies can be fully characterized by some state-independent control targets.Comparative statics are conducted to unfold the monotone impacts of various model parameters on the optimal decisions.We further study the contributions of each solution numerically,and identify the unit operational cost as the key determinant in prioritizing a specific solution.Most of the analytical results are validated for model extensions with age-dependent returns.Finally,we take a strategic perspective towards the EOL problem by studying the supply chain competition and coordination issues under this problem.Specifically,we consider a model in which after the supply discontinuance of a part,a manufacturer can solely depend on the inventory procured in last-time buy from the supplier to satisfy demand,or can further cooperate with an aftermarket manufacturer who continues to produce the part to guarantee supply.Two decentralized supply chain models are constructed for these two scenarios,respectively.The former consists of the manufacturer and the supplier,and the latter is a three-stage supply chain including an additional aftermarket manufacturer.Parts procurement costs become endogenous and Stackelberg games with the supplier acting as the leader are analyzed under the classical “selling to the newsvendor” framework.One interesting finding is that the manufacturer earns less profit in the three-stage model than in the two-stage one,and thus may not be willing to source from the aftermarket manufacturer even it is possible.We then design buyback contracts,through which the supplier subsidizes the other firms on the leftover inventory,as the coordinating mechanism of the supply chains.We also numerically derive those contracts that facilitate Pareto improvement for all firms,by which the adoption of extra parts supply source can be used to facilitate a more effective management of the EOL problem through business contracts.