Multi-item service constrained (s,S) policies for spare parts logistics systems

Morris A. Cohen · Paul R. Kleindorfer · Hau L. Lee · David F. Pyke

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Supply Chain and Inventory Management Reliability and Maintenance Optimization Sustainable Supply Chain Management

Abstract

Many organizations providing service support for products or families of products must allocate inventory investment among the parts (or, identically, items) that make up those products or families. The allocation decision is crucial in today's competitive environment in which rapid response and low levels of inventory are both required for providing competitive levels of customer service in marketing a firm's products. This is particularly important in high-tech industries, such as computers, military equipment, and consumer appliances. Such rapid response typically implies regional and local distribution points for final products and for spare parts for repairs. In this article we fix attention on a given product or product family at a single location. This single-location problem is the basic building block of multi-echelon inventory systems based on level-by-level decomposition, and our modeling approach is developed with this application in mind. The product consists of field-replaceable units (i.e., parts), which are to be stocked as spares for field service repair. We assume that each part will be stocked at each location according to an (s, S) stocking policy. Moreover, we distinguish two classes of demand at each location: customer (or emergency) demand and normal replenishment demand from lower levels in the multiechelon system. The basic problem of interest is to determine the appropriate policies (si Si) for each part i in the product under consideration. We formulate an approximate cost function and service level constraint, and we present a greedy heuristic algorithm for solving the resulting approximate constrained optimization problem. We present experimental results showing that the heuristics developed have good cost performance relative to optimal. We also discuss extensions to the multiproduct component commonality problem.

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References

1986Decision systems for inventory management and production planning 1986The Effect of Commonality on Safety Stock in a Simple Inventory Model 1990Optimizer: IBM's Multi-Echelon Inventory System for Managing Service Logistics 1959Studies in the Mathematical Theory of Inventory and Production 1988Service Constrained (s, S) Inventory Systems with Priority Demand Classes and Lost Sales 1989Component commonality in assemble-to-order systems: Models and properties 1985Safety stocks and component commonality 1986An inventory model with component commonality

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