Stockout Risk Estimation and Expediting for Repairable Spare Parts

Abstract

Stockouts of repairable spares usually lead to significant downtime costs. Managers of Maintenance Repair Organizations (MROs) seek advance indicators of future stockouts which might allow them to take proactive actions that are beneficial for achieving target service levels with reasonable costs. Among such (proactive) actions, the most common, and the cheapest one is expediting existing repair processes. In this study, we develop an advance stockout risk estimation system for repairable spare parts. To the best of our knowledge, this is the first study to estimate the future stockout risk of a repairable part. The method considers different statistics, e.g. the number of ongoing repair processes, demand rate, repair time, etc. to estimate stockout risk of a repairable part for a given planning horizon. In our field tests with empirical data, the suggested method overperforms two heuristic approaches and achieves accuracy rates of 63% for 15 day-planning horizon and 83% for 45 days. We also suggest a repairable inventory control system including repair expediting, inspection and con-demnation processes. To optimize the control parameters we suggest a simple algorithm considering two constraints: Target service level and maximum fraction of expedited demand. The algorithm is proved to be efficient for finding the optimum policy parameter in our tests with empirical data. Tests with empirical data suggest savings up to 8%. Both systems are implemented at an MRO as building blocks of a inventory control tower. The impact of the implementation is assessed with empirical simulations and verified from the financial indicators of the company.