Development and evaluation of an inventory model for low-demand spare parts

Infrequently demanded spare parts present managers with unique challenges for inventory management. Based on actual data from a US Fortune 500 multinational company, the objective of this paper is to describe the development and evaluation of a spare parts inventory control model. The model's performance is compared with the results achieved using the forecasting and inventory management modules of a popular enterprise resource planning (ERP) system. The model presented in this paper is cost-based and simple enough for practical application. The modeling process aggregates groups of spare parts according to similarities in their demand histories and lead times. We show that the proposed model outperformed the commercial ERP model on both measures of service level and expected total annual cost.