Target stock level and fill rate optimization for worldwide spare parts inventory management: A case study in business aircraft industry

Abstract

Inventory management of spare parts is very important for manufacturing and service companies. One of the most difficult challenges for this objective is to focus simultaneously on cost effective inventory management versus best availability level for spare parts. This paper presents the specific methods to optimize business aircraft spare parts inventory system, allowing to define the Target Stock Levels (TSL) by considering the demand forecasts for a given planning horizon. By studying the detailed analysis of historical data of a well-known business aircraft (Dassault Falcon Jet - USA), a methodology is proposed to find optimal TSL, Re-Order Point (ROP), Safety Stock (SS) and on Expected Backorder (EBO), while achieving the global fill rate. Moreover, we focus on fill rate optimization to find the maximum fill rate that can be achieved with a defined target stock level investment. Three scenarios are examined regarding the distributions of demands: 1) best distribution function based on each part’s demand historical data, 2) an approximate distribution (Normal) for all parts, 3) Poisson and Normal distributions for parts with low and high demands during lead-time respectively. A heuristic method based on greedy algorithm is proposed to find the optimal solution. Finally, A comparison between different scenarios results based on total cost, average Cycle Service Level (CSL) and EBO show that the best scenario is the Poisson or Normal distributions for the demand during lead-time. This study is validated by real data in business aircraft industry, and numerical results show significant improvement.