Inventory models with lateral transshipments : a review

Lateral transshipments within an inventory system are stock movements between locations of the same echelon. These transshipments can be conducted periodically at predetermined points in time to proactively redistribute stock, or they can be used reactively as a method of meeting demand which cannot be satised from stock on hand. The elements of an inventory system considered, e.g. size, cost structures and service level denition, all in uence the best method of transshipping. Models of many dierent systems have been considered. This paper provides a literature review which categorizes the research to date on lateral transshipments, so that these dierences can be understood and gaps within the literature can be identied

Inventory planning for spare parts networks with delivery time requirements

Motivated by real life, we introduce a new inventory model for spare parts where we explicitly take delivery time requirements into account. In this single-echelon, multilocation network, demand of a customer can be satisfied from multiple warehouses, but only if the customer can be reached from a warehouse within a time limit that is specified in the service contract of the customer. A delivery to a customer from a warehouse other than the closest one is referred to as a lateral transshipment. We develop a fast and accurate approximate algorithm to evaluate the performance of the network under given base stock levels and propose a fast and effective heuristic to set base stock levels. Numerical experiments show that planning with lateral transshipments can lead to cost savings up to 47% when compared to planning without lateral transshipments. Furthermore, we show the importance of taking lateral transshipments into account when designing a spare parts network

Framework for Evaluation of Strategies for Pooling of Repairable Spare Parts

Background: The ability to quickly provide parts for the supply of advanced technical systems in equipment-intensive industries (such as airlines and nuclear power plants) is critical to the systems overall performance. In order to maintain a targeted system availability large quantities of spare parts are often required which in turn results in excessive inventory costs. Seeing as inventory systems often account for a large proportion of a business‟ costs a tough issue faced by companies in these industries is how to reduce the total inventory cost without having a negative impact on the system availability. An approach that may successfully deal with such a problem is pooling. Pooling refers to an arrangement in which multiple owners of the same type of technical systems cooperate by sharing their inventories. Purpose: The theoretical purpose of the thesis is to emphasize different pooling strategies and to identify and assess the characteristics of the strategies. The practical purpose of the thesis is to develop a robust method that facilitates a fair comparison of considered strategies. The objective is thus to develop a generic model that evaluates soft values (here, referred to as soft aspects) for each strategy, and also, to put the soft aspects in relation to the annual cost of a strategy in a final model. iv Methodology: The initial phase of the thesis was dedicated to a desk study review of current literature within the field of study. Recently published scientific articles, papers authored by consultants at Systecon, and literature used in courses at the Faculty of Engineering at Lund University lay the basis for the theoretical framework. The framework developed is derived from discussions with the supervisors in connection with interviews carried out with; relevant Systecon customers and company representatives at two trade fairs, Offshore Wind 2009 and Nordic Rail 2009. Conclusion: This thesis presents a framework for evaluation of strategies (stand alone, ad hoc cooperation, cooperative pooling, and commercial pooling) for pooling of repairable spare parts. Characteristics of all strategies are emphasized and assessed. From the characteristics, which are provided in Table 5.3, a model to evaluate soft values of each strategy is derived. The model, named evaluation of soft values, is provided in Table 5.4 and Table 5.5. Also, a methodical approach to derive a final strategy is provided in section 5.7. To make sure that a decision-maker is well aware of how the model should be applied, a fictitious case study is build up in where every step of the decision making process is thoroughly described. Furthermore, in the case study a final model that facilitates the derivation of a best strategy is presented. By means of a specified weighting coefficient and properly chosen set of scales, the final model provides with a final strategy. The outcome of the final model is based on the outcomes of the cost models and the outcomes of the evaluation of soft values model

An Innovative Business Model for a Multi-echelon Supply Chain Inventory Management Pattern

Nowadays, companies are experimenting novel organizational solutions to efficiently operate in uncertain and highly dynamic scenarios. As a potential solution, this paper proposes a new business model for a multi-echelon Supply Chain inventory management pattern. Specifically, an inventory model with proactive lateral transshipments was developed and subsequently tested carrying out 288 experiments with the aim of assessing transshipments impact on the performance of a two-echelon Supply Chain. The final goal was to investigate the potential reduction of the overall cost of the enterprise and, conversely, whether this approach could promote significant improvements in the level of service, achievable through a more efficient management of resources. The analyses and simulations indicate the use of large batches and/or low-cost products did not demand the necessity of transshipment events. These preliminary findings could be potentially validated and tested in the future considering more complex networks or multiple products

Multiobjective Coordination Models For Maintenance And Service Parts Inventory Planning And Control

In many equipment-intensive organizations in the manufacturing, service and particularly the defense sectors, service parts inventories constitute a significant source of tactical and operational costs and consume a significant portion of capital investment. For instance, the Defense Logistics Agency manages about 4 million consumable service parts and provides about 93% of all consumable service parts used by the military services. These items required about US$1.9 billion over the fiscal years 1999-2002. During the same time, the US General Accountability Office discovered that, in the United States Navy, there were about 3.7 billion ship and submarine parts that were not needed. The Federal Aviation Administration says that 26 million aircraft parts are changed each year. In 2002, the holding cost of service parts for the aviation industry was estimated to be US$50 billion. The US Army Institute of Land Warfare reports that, at the beginning of the 2003 fiscal year, prior to Operation Iraqi Freedom the aviation service parts alone was in excess of US$1 billion. This situation makes the management of these items a very critical tactical and strategic issue that is worthy of further study. The key challenge is to maintain high equipment availability with low service cost (e.g., holding, warehousing, transportation, technicians, overhead, etc.). For instance, despite reporting US$10.5 billion in appropriations spent on purchasing service parts in 2000, the United States Air Force (USAF) continues to report shortages of service parts. The USAF estimates that, if the investment on service parts decreases to about US$5.3 billion, weapons systems availability would range from 73 to 100 percent. Thus, better management of service parts inventories should create opportunities for cost savings caused by the efficient management of these inventories. Unfortunately, service parts belong to a class of inventory that continually makes them difficult to manage. Moreover, it can be said that the general function of service parts inventories is to support maintenance actions; therefore, service parts inventory policies are highly related to the resident maintenance policies. However, the interrelationship between service parts inventory management and maintenance policies is often overlooked, both in practice and in the academic literature, when it comes to optimizing maintenance and service parts inventory policies. Hence, there exists a great divide between maintenance and service parts inventory theory and practice. This research investigation specifically considers the aspect of joint maintenance and service part inventory optimization. We decompose the joint maintenance and service part inventory optimization problem into the supplier s problem and the customer s problem. Long-run expected cost functions for each problem that include the most common maintenance cost parameters and service parts inventory cost parameters are presented. Computational experiments are conducted for a single-supplier two-echelon service parts supply chain configuration varying the number of customers in the network. Lateral transshipments (LTs) of service parts between customers are not allowed. For this configuration, we optimize the cost functions using a traditional, or decoupled, approach, where each supply chain entity optimizes its cost individually, and a joint approach, where the cost objectives of both the supplier and customers are optimized simultaneously. We show that the multiple objective optimization approach outperforms the traditional decoupled optimization approach by generating lower system-wide supply chain network costs. The model formulations are extended by relaxing the assumption of no LTs between customers in the supply chain network. Similar to those for the no LTs configuration, the results for the LTs configuration show that the multiobjective optimization outperforms the decoupled optimization in terms of system-wide cost. Hence, it is economically beneficial to jointly consider all parties within the supply network. Further, we compare the model configurations LTs versus no LTs, and we show that using LTs improves the overall savings of the system. It is observed that the improvement is mostly derived from reduced shortage costs since the equipment downtime is reduced due to the proximity of the supply. The models and results of this research have significant practical implications as they can be used to assist decision-makers to determine when and where to pre-position parts inventories to maximize equipment availability. Furthermore, these models can assist in the preparation of the terms of long-term service agreements and maintenance contracts between original equipment manufacturers and their customers (i.e., equipment owners and/or operators), including determining the equitable allocation of all system-wide cost savings under the agreement

Multilocation Inventory Systems With Centralized Information.

The management of multi-echelon inventory systems has been both an important and challenging research area for many years. The rapid advance in information technology and the emphasis on integrated supply chain management have new implications for the successful operation of distribution systems. This research focuses on the study of some fundamental issues related to the operation of a multilocation inventory system with centralized information. First, we do a comparative analysis to evaluate the overall performance of individual versus centralized ordering policies for a multi-store distribution system where centralized information is available. This study integrates the existing research and clarifies one of the fundamental questions facing inventory managers today: whether or not ordering decisions should be centralized. Next, we consider a multi-store distribution system where emergency transshipments are permitted among these stores. Based on some simplifying assumptions, we develop an integrated model with a joint consideration of inventory and transshipment components. An approximately optimal (s, S) policy is obtained through a dynamic programming technique. This ordering policy is then compared with a simplified policy that assumes free and instantaneous transshipments. We also examine the relative performance of base stock policies for a centralized-ordering distribution system. Numerical studies are provided to give general guidelines for use of the policies