Improving Logistics Processes in a Global Spares Supply Organization

Abstract

This thesis studies logistics processes related to balancing of the inventories between supply channels. Balancing operations are based on lateral transshipments, which are a recent field of studies and have been on the focus of the optimization studies during the past few years. The findings of the study model current processes and material flows, reveals issues related to processes, studies cost figures and provides alternative solutions for improvement. The main objective of the study is to provide a construction that makes it possible to improve decision-making related to inventory balancing between the distribution centers of the organization. This study answers three main questions: How does the existing inventory network look like? What kind of issues and development areas are there? How is it possible to improve current inventory pooling operations?

This study is a single case study carried out in a global spares supply organization willing to improve their logistics processes. To achieve the objects of the study, several methods were needed: literature survey on logistics models, sourcing methods and logistics cost models, qualitative information through interviews in the case company, study of the existing process descriptions and contract terms in addition to several quantitative analyses on the performance of the operations. Due to multiple methods, reliability and validity is increased as is the extent of the study.

Findings of this study demonstrate that the expansion of the company on Asian markets is in its infancy and that the processes lack standardization and appropriate tools. Asian Distribution Center is highly dependent on European suppliers. Despite the strategic aspect of Asian supplier markets, supplier base does not yet provide a comprehensive alternative for balancing transshipments from Europe. This underlines the importance of processes on inventory balancing as they provide significant cost reductions against local sourcing in Asia at the moment. It is recommended to continue balancing using European supply chains, but to set up ocean deliveries for major flows and to focus sourcing efforts on establishing local suppliers for materials that have the highest importance by their total value. Future studies should provide more detailed information on quality and sourcing related costs to improve cost analysis and comparisons in addition to benchmarking values and ratios. /Kir12