Stocking decisions for repairable spare parts pooling in a multi-hub system

This paper presents an analytical model for determining spare parts stocking levels in a single-item, multi-hub, multi-company, repairable inventory system in which complete pooling of stock is permitted among the hubs and companies. The objective is to minimize the total system cost which consists of inventory holding cost, downtime cost and transshipment cost. We develop an approximation method to compute the logistical system performance measures needed for calculating the cost function. To find the optimal stocking levels, a two-stage solution is proposed. In the first stage, the demands at all hubs are aggregated and treated as if occurring at a single location. The optimal number of total spare parts is determined by minimizing the sum of inventory holding cost and downtime cost. In the second stage, a heuristic procedure is developed to find the optimal allocation of the total spare parts to minimize the total transshipment cost.