Determination of reorder points for spare parts in a two-echelon inventory system: The case of non identical maintenance facilities

Abstract This paper deals with the determination of reorder points in a two-echelon spare parts inventory system. The system consists of a central warehouse that supplies several maintenance facilities. Each maintenance facility faces random demand. Inventory carrying cost is the same in both echelons, but the consequences of stockout vary among the maintenance facilities. An inventory management policy is proposed that determines the reorder point for each facility, so that predetermined requirements concerning relationships between the resulting service levels are met. The inventory system described in this paper is typical to class A (in a Pareto or ABC analysis) of spare parts inventories, i.e., military. Limited quantities of spare parts are stocked in an inventory system serving several maintenance facilities. The same type of equipment is maintained by each facility. However, due to readiness requirements of the organizational units served by each facility, the required service levels of the centers are not all the same.