Multicriteria Approach to Spare Parts Inventory Problem with Obsolescence

Open Access
Zope, Saurabh Avinash
Graduate Program:
Industrial Engineering
Master of Science
Document Type:
Master Thesis
Date of Defense:
Committee Members:
  • Arunachalam Ravindran, Thesis Advisor
  • Inventory Management
  • Multicriteria Optimization
  • Continuous Review Policy
  • Compromise Programming
  • Efficient Frontier
This thesis considers multi-criteria optimization models to solve the spare parts inventory problem which are prone to obsolescence. In addition to the obsolescence, the criticality and carry over potential of the spare parts are also taken into consideration. A centralized supply chain of two stages is considered, which includes one company and multiple suppliers providing the spare parts to the company. The demand for spare parts and number of obsolete spare parts are considered to be stochastic and assumed to follow Poisson distributions. They are used to derive the distribution of spare parts consumption through convolution of two random variables. The Lead Time Demand (LTD) and Lead Time Obsolescence (LTO) are assumed to follow normal distributions. Next, a bi-criteria optimization problem is formulated on the basis of a continuous review inventory policy with two criteria: minimizing the Weighted Expected Total Cost (ETC) and maximizing the Weighted Cycle Service Level (CSL). The weights for the spare parts are calculated using the Analytic Hierarchy Process (AHP) with three main criteria: Stockout Implication, Type of Spare Part and Carryover Potential. The efficient frontier of the bi-criteria optimization problem is generated using the "constraint" approach. Finally, an example is presented to illustrate the bi-criteria problem, solution by the constraint method and generation of the efficient frontier.