Study on Optimization of a Multi-Location Inventory Model with Lateral Transshipment Considering Priority Demand

Abstract

For complex system, often a variety of equipment with different priorities require a spare. Spares supply management constitutes a fundamental decision-making problem, especially in systems which require high support levels. Considering the priority demand classes in actual spares supply, a two-echelon and multi-location continuous review inventory model with waiting time constraints is formed. To better match supply and demand, lateral transshipments and emergency shipments occur in response to stockouts. The model is to find an optimal inventory for each stock point under target service level, against a backdrop of cost minimization objective. A genetic algorithm is applied to get the results and a numerical example is presented to demonstrate the validity of the model. Finally,the proposed model manages to incentive a dexterous spares supply based on service differentiation and successfully provide a theoretical basis for decision makers to plan and control inventory.