Optimising net margins and stock position in spare parts inventory echelons

This paper examines the position problems of spare parts in inventory echelons. In particular a method is developed which can jointly optimise both the stock level and stock location problem. It is based on a so called optimum rate of stock turnover which is shown to minimise the real net margin earned by an inventory item at a given location. The paper also gives some consideration to the traditional methods for measuring aggregate stock performance when the inventory factors such as usage values are highly skewed and invariably follow a lognormal distribution in the spare parts case.