Stock replenishment policies for a stochastic exponentially-declining demand process

This paper addresses the problem of determining stock replenishment policies to meet the demand for spare parts for items of equipment which are no longer manufactured. The assumptions that the number of items still in use is decreasing and that parts fail randomly lend credence to a Poisson demand...

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Bibliographic Details
Published in:European journal of operational research 1999-07, Vol.116 (2), p.374-388
Main Authors: Hill, Roger M., Omar, Mohd, Smith, David K.
Format: Article
Language:English
Subjects:
Applied sciences
Dynamic programming
Exact sciences and technology
Inventory
Inventory control
Inventory control, production control. Distribution
Mathematical programming
Operational research and scientific management
Operational research. Management science
Operations research
Production
Spare parts
Stochastic models
Studies
Supply & demand
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Summary:This paper addresses the problem of determining stock replenishment policies to meet the demand for spare parts for items of equipment which are no longer manufactured. The assumptions that the number of items still in use is decreasing and that parts fail randomly lend credence to a Poisson demand process with an underlying mean which is decreasing exponentially. We use a dynamic programming formulation in continuous time to determine that replenishment policy which minimises the mean total discounted cost of set-up/order, unit production/purchase, unsatisfied demand and stock left over at the end of the time horizon.
ISSN:0377-2217
1872-6860
DOI:10.1016/S0377-2217(98)00223-9