Managing the last mile of the supply chain for spare parts

The last mile – the last link in the supply chain to the consumer – forms an important component in physical distribution. Several studies express the importance of physical distribution on consumer loyalty and consumer satisfaction (de Koster, 2002; Thirumalai and Sinha, 2005). Heim and Sinha (2001) found that variables underlying the order fulfillment process such as ease of return, timeliness of delivery and product availability are significantly correlated with consumer loyalty. Somewhat the same is signaled by Thirumalai and Sinha (2005) who found on-time delivery, order tracking/status information, products meeting expectations and consumer support as variables measuring satisfaction with order fulfillment. Bromage (2001) especially mentions that for consumer satisfaction and loyalty, the last mile in the fulfillment process may be one of the most important. Furthermore, physical distribution activities are very important from a cost perspective because e-fulfillment is one of the most expensive and critical operations of internet sellers (de Koster, 2002). The addition of the online channel makes the last mile more complex, by creating more search, order and after sales options for consumers and by creating more delivery possibilities in the last mile. Unique to e-fulfillment is that inventories may be decoupled from what is displayed to consumers. This increases

flexibility in locating inventory (Agatz et al., 2008). The absence of inventory on display even makes it possible for retailers to avoid inventory altogether, by delivering consumer orders directly from
their suppliers inventories, which is called drop-shipping (Agatz et al., 2008). In this research, we focus on after sales service supply chains, and in particular on spare parts because after sales service is generally seen as an important source of differentiation, additional revenue and also as essential for increasing consumer satisfaction and loyalty (e.g. Cohen and Lee, 1990; Goffin, 1999). Spare parts management is considered one of the most important areas in after sales services (Gaiardelli et al., 2007). Little research has been done on spare parts distribution in business to consumer (B2C) settings. In practice this area is rapidly expanding as examples of companies supplying spare parts to their consumers show. Large companies like Philips2 and Siemens3 for example are already extending after sales services by offering the opportunity to buy spare parts for their consumer products via their websites. These companies offer consumers not only access to repair centers or the option of sending mechanics to your home, but also support replacing failed components yourself. Literature on consumer self-servicing in the home improvement and maintenance sector shows a broad consumer willingness in doing work themselves without the paid services of a professional (Adriaenssens and Hendrickx, 2009). No research however is known that focuses on the specific consumer requirements and last mile supply chain design for do-it-yourself (DIY) part replacement activities. In this paper we take a consumer centric view on spare part management and investigate last mile supply chain design to support consumer DIY repair. Literature noted some motivations for performing DIY activities (Wikström, 1996; Williams, 2004; Etgar 2008; Wolf and McQuitty, 2011): economic constraints, a lifestyle choice (sense of freedom, of power, of craftsman, flexibility, pleasure, self-identity, uniqueness, etc.), lack of access to, or lack of reliability and quality of professionals. We investigate delivery methods and ordering characteristics in the last mile of the supply chain for spare parts that consumers intend to use for DIY repair activities.