Design of BOM configuration for reducing spare parts logistic costs

Design of BOM configuration for reducing spare parts logistic costs Muh-Cherng Wu and Yang-Kang Hsu Department of Industrial Engineering and Management, National Chiao Tung University, Hsin-Chu, Taiwan, ROC Abstract This paper proposes an approach to reduce the total operational cost of a spare part logistic system by appropriately designing the BOM (bill of material) configuration. A spare part may have several vendors. Parts supplied by different vendors may vary in failure rates and prices – the higher the failure rate, the lower the price. Selecting vendors for spare parts is therefore a trade-off decision. Consider a machine where the BOM is composed of s critical parts and each part has k vendors. The number of possible BOM configurations for the machine is then k. For each BOM configuration, we can use OPUS10 (proprietary software) to calculate an optimum inventory policy and its associated total logistic cost. Exhaustively searching the solution space by OPUS10 can yield an optimal BOM configuration; however, it may be formidably time-consuming. To remedy the time-consuming problem, this research proposes a GA-neural network approach to solve the BOM configuration design problem. A neural network is developed to efficiently emulate the function of OPUS10 and a GA (genetic algorithm) is developed to quickly find a near-optimal BOM configuration. Experiment results indicate that the approach can obtain an effective BOM configuration efficiently.