A Minimum Cost Model of Spare Parts Inventory Control

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Abstract
A mathematical model of a spare parts inventory control policy is constructed. The model is intended to apply to the case in which it is the policy to carry a maximum of one spare part in inventory. Under some relatively mild assumptions on the probability distributions of the time between demands for spare parts and of lead times, an overall cost function associated with any spare parts policy (SPP) is derived. An optimum SPP is defined to be one which minimizes the derived cost function. The minimization of the cost function leads to some objective criteria, stated in the form of a set of decision rules, to determine when to order a spare part. These rules are summarized at the end of Section 3. A brief discussion of these rules is contained in Section 4.

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