Customer Information Driven After Sales Service ... - RePub

5. Returns Management in Spare Parts Logistics
To ascertain that the performance of the return heuristics is independent of the sourcing
method, we also compare the performance of the spiral router sourcing heuristic vs. the
return heuristics discussed in Section 5.5.
First, we describe the details of the simulation test bed design and the parameters
used in the numerical experiments. The simulation test bed is similar to the simulation
test bed used in Section 5.4.1. For the information enriched methods, we use the decisions
calculated by the sequential MDP formulation. In the case of the return heuristics, we
estimate the return decisions according to the heuristics and insert the return decisions
into the MDP formulations of Section 5.4 to obtain the forward sourcing decisions. The
heuristic based return decisions together with the sourcing decisions from the MDP
formulations are used in the simulation experiments to calculate the average profits.
Simulation experiments are performed at various demand and return rates to observe the
behavior of each method. By varying demand rates, we induce over-stocking and understocking
situations in the stock location network. Each simulation experiment consists of
1000 runs, where the same random number streams are used to obtain consistent results
with a reduced number of simulation runs.
5.5.2 Results
We now discuss the results of our simulation experiments. Similar to the numerical
experiments discussed in Section 5.4.1, we perform simulation experiments with heterogeneities
in the customer base by using the parameters described in Table 5.1. In the
first set of experiments, the sourcing decision is based on the sequential MDP formulation
(i.e. Equation 5.2). The results are depicted in Table 5.3.
We perform the experiments at various D/C and return ratios. In Table 5.3, we depict
the average profits of the proposed heuristic solutions and their comparison with the
MDP formulation. It is easy to note that all of the proposed heuristics perform at a level
that is inferior to the MDP formulation. However, the degree to which the performance
is degraded varies. The performance of the return to original heuristic appears to be the
worst among all of the heuristics. The losses as compared to the sequential MDP formulation
range from 0.18% to 7.09%. The random assignment heuristic performs slightly
better than the return to original heuristic. However, the losses as compared to the
MDP formulation range from 0.24% to 2.66%. In Section 5.5, we highlighted that the
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