A Network Model for Spare Parts Distribution Based on Customer Segmentation and Demand Characteristics

Abstract

The development in science and technology, especially in the era of industrial globalization has triggered many companies to develop their potential capability in order to excel in the increasingly competitive competition. Basically, customers expect to acquire the exact products or services at the right time and at an acceptable price. This leads to the challenge that a company has to improve not only their product quality, but also their product supply chains. In many products, there are some needs for part replacement to maintain the product durability. Thus, managing parts (or in the automotive industry is called spare parts) is crucial for maintaining company sustainability. However, managing parts or supply chain management for spare parts is quite difficult because the demand pattern is fluctuating and difficult to predict. Company X is a main dealer for particular motorcycle spare parts which has a warehouse in Karawang, West Java, Indonesia. Company X does not manufacture spare parts, it only orders spare parts from manufacturer and delivers the customers’ order. Company X has approximately 300 regular customers whose locations spread over from one to another. There are problems faced by Company X in regard to its distribution process, especially in maintaining minimum delivery time. There is a relatively high delivery time (currently over 24 hours), resulting in delays in fulfillment of customers’ demand and decreasing customer satisfaction level. This paper focused on developing a network model for spare parts distribution based on customer segmentation and demand characteristics. According to the model, it is expected that the model will reduce delivery time and delivery cost in spare parts distribution of Company X.