Abstract In practice, maintenance and spare parts inventory policies are treated separately or sequentially. To ensure availability of spare parts for a production system use, when necessary, there is always a tendency to overstock them. Excess inventory involves substantial working capital. The stock level of spare parts is dependent on the maintenance policy. Therefore, maintenance programs should be designed to reduce both maintenance and inventory related costs. In this paper, a manufacturing system is considered with stochastic item failure, replacement and order lead times of statistically identical items. The development of mathematical model for such a system is extremely difficult. A simulation model is therefore developed for the system operating with block replacement and continuous review inventory policy. The response of the system was studied for a number of case problems. The study clearly shows that the jointly optimized policy produces better results than that of the combination of separately or sequentially optimized policies.
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