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A new approximate evaluation method for two-echelon inventory systems with emergency shipments

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  • Erhun Özkan
  • Geert-Jan Houtum
  • Yasemin Serin

Abstract

We consider the inventory control of repairable spare parts in a network consisting of a central warehouse, a central repair facility, and multiple local warehouses. Demands for spare parts occur at the local warehouses. If a local warehouse is out of stock, then an arriving demand is satisfied by an emergency shipment from the central warehouse or the central repair facility. Such emergency shipments are common practice for networks that support technical systems with high downtime costs. We develop a new evaluation method that provides accurate approximations for the key performance measures like fractions of demands supplied by the local warehouses or emergency shipments. The method can be easily incorporated in existing (greedy) heuristic optimization methods. Our method outperforms the approximate evaluation method of Muckstadt and Thomas (Manag. Sci. 26:483–494, 1980 ), as we show via a numerical analysis. Finally, we show that the performance of the system is virtually insensitive to the leadtime distribution of repairs at the central repair facility. Copyright Springer Science+Business Media New York 2015

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  • Erhun Özkan & Geert-Jan Houtum & Yasemin Serin, 2015. "A new approximate evaluation method for two-echelon inventory systems with emergency shipments," Annals of Operations Research, Springer, vol. 224(1), pages 147-169, January.
    • Handle: RePEc:spr:annopr:v:224:y:2015:i:1:p:147-169:10.1007/s10479-013-1401-9
    DOI: 10.1007/s10479-013-1401-9
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    References listed on IDEAS

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    6. van den Berg, D. & van der Heijden, M.C. & Schuur, P.C., 2016. "Allocating service parts in two-echelon networks at a utility company," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 58-67.
    7. Johansson, Lina & Olsson, Fredrik, 2018. "Age-based inventory control in a multi-echelon system with emergency replenishments," European Journal of Operational Research, Elsevier, vol. 265(3), pages 951-961.

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