End-of-life service: A case study

Philips is a company that produces electronic equipment like kitchen appliances, television sets, videorecorders, medical equipment, and so on. This equipment is sold world-wide. The central service organization of Philips, situated in Eindhoven (The Netherlands), is responsible for providing spare parts for these products during the entire service period. The length of this service period depends on the type of product. Television sets, for instance, have a service period of eight years. Since the service period is typically much longer than the production period, the service department places a large ‘final order’ for spare parts at the moment the product is taken out of production. This final order is expected to suffice, with a sufficiently large probability, until all service obligations have ended. In this paper we seek close to optimal final order quantities. Actually, this paper is a follow-up on a more theoretical paper, in which a close to optimal final order quantity, given by an explicit formula, was derived. This paper presents the results of trying to apply that formula in practice.