Optimization models for critical spare parts inventories–a reliability approach

In industries characterized by heavy utilization of equipment and machinery, such as mining, oil & gas, utilities, transportation, adequate stockholding of critical spare parts becomes essential. Insufficient stocks affect overall performance of physical assets, as lack of spares may result in gross penalties, lower availability or increased operational risks. On the other hand, oversized inventories lead to inefficient use of capital and may imply severe expenditures. This paper presents various approaches for the determination of the optimal stock size, when the stock is composed of (i) non‐repairable or (ii) repairable parts. The paper is focused on spares for relatively expensive, highly reliable components, rather than on fast‐moving spare parts. Optimization criteria considered are minimization of costs, maximization of equipment availability, and the achievement of a desired stock reliability (probability that a spare part request will not be rejected because of the lack of spares in stock). For stock reliability, instantaneous and interval reliability calculations are considered. In addition, models directed to the estimation of the remaining life of a given stock of spare parts (at a certain stock reliability level) are introduced. The paper describes several models subject to practical industrial application, and presents case studies from utilities and mining to illustrate their use.