On Spare Parts Demand and the Installed Base Concept : A Theoretical Approach

Aftersales services are an important business component for companies and Original Equipment Manufacturers (OEMs) aim to design their service supply chain before the introduction of their products to the market. For OEMs, mathematical models are important for projecting future volumes of their aftersales business throughout the lifetimes of their products. In this study, we develop a stochastic model that combines installed base, spare parts demand and the number of discarded products within a single modeling framework based on product characteristics: sales rate, usage time and failure rate. We develop an analytical characterization of some crucial milestones in the life cycle