Optimization of aftermarket logistics with dual supply chains for Sandvik AB

University essay from Lunds universitet/Institutionen för teknisk ekonomi och logistik; Lunds universitet/Teknisk logistik

Abstract: Background: Aftermarket logistics is important for a manufacturing company to maintain customer satisfaction in the long run. However, the supply chain set for aftermarket parts is equally crucial as the original equipment. Modification or optimization of the logistics systems for slow-moving aftermarket items is inevitable. Sandvik, an engineering company in the mining industry is now interested in optimizing its aftermarket logistics. The analysis will be for the stone crusher models for which original equipment is assembled in China, however the aftermarket items are still supplied from the production site in Sweden. Sandvik is considering even sourcing the aftermarket parts from the suppliers based in China. The company expects the optimization decision will help reduce the complexity of the supply chain and the overall total costs. Before making the decision, it is important to study the logistics and administrative related factors and its impact on the optimized supply chain. Purpose: The purpose will be to analyze the decision of phasing out selected aftermarket items from the production unit (PU) Svedala alongside developing a generic decision model which will support a similar decision-making process in the future. Methodology: Case-based research to analyze the change in different costs, lead times and other qualitative aspects if the aftermarket items are moved to the sister site in China and comparing it with the current values. Design science is applied to develop a decision model which will be generic to all crusher models. All related data were collected from the case company. The master thesis follows an abductive research approach. Conclusion: Sandvik should implement a single SC for stone crusher models AG120 & GA230 by sourcing the equipment and aftermarket items from the suppliers based in China. This will ensure these slow-moving items have a linear supply chain with same efficiency at lower total costs. A generic decision model is present which will help the company take similar optimization decisions in the future. Major factors like annual demand, total costs, lead times, after-effects on manufacturing as well as trade compliances are incorporated in the decision model. Sandvik should search for alternate back-up suppliers to reduce the risk of high supplier dependency due to single sourcing. Better information sharing between the DC and production sites can reduce the bullwhip effect. Longer lead-times can be compensated by having higher safety stocks and efficient inventory control Keywords: Supply chain optimization, Aftermarket logistics, Single and Dual supply chains, Decision Model

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