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Inventory management of spare parts in an energy company

Listed author(s):
  • Guajardo, Mario


    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

  • Rönnqvist, Mikael


    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

  • Halvorsen, Ann Mari


    (Statoil ASA)

  • Kallevik, Svein Inge


    (Statoil ASA)

We address a problem of inventory management of spare parts in the context of a large energy company, producer of oil and gas. Spare parts are critical for assuring operational conditions in offshore platforms. About 200,000 different items are held in several inventory plants. The inventory system implemented at the company corresponds to a min-max system. The control parameters are decided based mainly on the expert judgment of the planners. Also, though the inventory plants can in practice be supplied from each other, the inventory planning is performed separately by the plant planners. This is because of different ownership structures where the studied company has the operative responsibility. The company is pursuing a system in which all planners conform to the same inventory management approach and evaluation, as well as being more cost efficient. Our work focuses on supporting this goal. We apply methods to decide the inventory control parameters for this system under a service level constraint. The methodology we use distinguishes unit-size and lot-size demand cases. We perform computational experiments to find control parameters for a sample of items. After the control parameters are found, we use them to explore the impact of risk pooling among the plants and inaccuracy arising from duplicate item codes.

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Paper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2012/6.

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Length: 31 pages
Date of creation: 08 Jun 2012
Handle: RePEc:hhs:nhhfms:2012_006
Contact details of provider: Postal:
NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway

Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
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  1. Morris A. Cohen & Paul R. Kleindorfer & Hau L. Lee, 1988. "Service Constrained (s, S) Inventory Systems with Priority Demand Classes and Lost Sales," Management Science, INFORMS, vol. 34(4), pages 482-499, April.
  2. Helmut Schneider & Jeffrey L. Ringuest, 1990. "Power Approximation for Computing (s, S) Policies Using Service Level," Management Science, INFORMS, vol. 36(7), pages 822-834, July.
  3. Dekker, R. & Kleijn, M. J. & de Rooij, P. J., 1998. "A spare parts stocking policy based on equipment criticality," International Journal of Production Economics, Elsevier, vol. 56(1), pages 69-77, September.
  4. Sridhar Bashyam & Michael C. Fu, 1998. "Optimization of (s, S) Inventory Systems with Random Lead Times and a Service Level Constraint," Management Science, INFORMS, vol. 44(12-Part-2), pages 243-256, December.
  5. Vereecke, Ann & Verstraeten, Peter, 1994. "An inventory management model for an inventory consisting of lumpy items, slow movers and fast movers," International Journal of Production Economics, Elsevier, vol. 35(1-3), pages 379-389, June.
  6. Dunsmuir, W. T. M. & Snyder, R. N., 1989. "Control of inventories with intermittent demand," European Journal of Operational Research, Elsevier, vol. 40(1), pages 16-21, May.
  7. Snyder, R. D., 1984. "Inventory control with the gamma probability distribution," European Journal of Operational Research, Elsevier, vol. 17(3), pages 373-381, September.
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