A Base Stock Inventory Management System for Intermittent Spare Parts

This paper examines a class of spare parts that exhibit the following characteristics: (1) highly intermittent or sporadic requirements that preclude the determination of a probability distribution for lead time demand, (2) sole vendors with relatively long replenishment lead times for uniquely designed parts, (3) small demand volumes, and (4) frequent returns to the parts warehouse. Such characteristics can be found in parts for ground space systems (such as antennas), aircraft engine parts, large infrastructure maintenance, and spare parts for nuclear power plants. Unavailability of these parts typically has high consequences, as failures can shut down the entire system. This paper develops a modified base stock policy for controlling the inventories of such items. The approach is based on an alternative measure for lead time demand that is developed using values observed during each demand occasion. It uses a retrospective numerical simulation, which results in the specification of base stock inventory levels for spare parts that minimize overall inventory investment, while adhering to a suitable user-defined risk tolerance profile. The approach is illustrated by a case study at a United States nuclear power plant and can be generalized to similar environments as the one considered. In particular, the testbed company illustrated in this research projects an 18 percent reduction in nuclear inventory through the application of the method.