A model for standardizing human decisions concerning service-contracts management

Increased expectations of today’s customers are causing businesses to offer a variety of warranty contracts for their products. Because of the intense customer contact that takes place during the process of supporting a contract, the planning for contracts has to not only contend with the unpredictable and low demands of the service parts, but must also rely on human decision-making concerning a number of subjective factors. These subjective factors, which are related to the customer, the contract and the contracted product, have seldom been considered in the literature on inventory planning. Moreover, the evaluation of subjective factors often becomes non-standardized and non-coordinated among the geographically dispersed decision-makers of an organization, as was the situation with a Fortune 100 company’s case that motivated this paper. We propose a combination of a heuristic procedure along with the Analytical Hierarchy Process technique that has not been applied in the inventory-planning setting. We also demonstrate how a Web-based information system can be used to standardize the decision process, and discuss the implications of the system on the motivational case. Computational results are also provided to show the effectiveness of the heuristics.