A demand classification based approach of inventory management for spare-parts and its application

This paper proposes a classification based inventory management approach for spare-parts. The approach firstly divides spare-parts into different classes; then demand forecasting method and inventory control policy for each class of spare-parts are suggested. Classification based forecasting is applicable when there are too many spare-part types and some types of spare-part do not have enough historical data, a better forecasting approach can be suggested according to characteristics of a spare-part class; classification based inventory decision on reorder point and order quantity can be properly made even when the enterprise can not measure unit backorder cost, which is usual in spare-part inventory management. Thus the approach proposed in this paper provides a practical framework of spare-part inventory management for process industries. Efficacy of the approach is illustrated by its application to valve's inventory management of a petrochemical enterprise.