The Repair Kit Problem with Fixed Delivery Costs

Abstract

The repair kit problem is the problem of managing the spare parts inventory of a field service technician. Contrary to most previous contributions we acknowledge that fixed costs per delivery to the technician make up an important share of the total field repair costs. Thus, we treat the replenishment frequency as a decision variable and suggest to manage the content of the repair kit using individual (R, s, S)-policies for each spare part with common review periods R for all parts sourced from the same supplier. We derive a closed-form expression for the job-fill-rate service level and suggest a heuristic to determine the length of the review period(s) as well as the reorder and order-up-to-levels for spare parts carried in the repair kit. Using a numerical experiment we show that lowering the replenishment frequency can lead to a substantial cost reduction. That is because delivery cost reductions outweigh the costs for additional safety stock.