Two-echelon spare parts inventory system subject to a service constraint

Deniz Caglar, Chung Lun Li, David Simchi-Levi

Research output: Journal article publicationJournal articleAcademic researchpeer-review

85 Citations (Scopus)


In this paper, we consider a spare parts inventory problem faced by a manufacturer of electronic machines with expensive parts that are located at various customer locations. The parts fail infrequently according to a Poisson process. To serve customers when a failure occurs, the manufacturer operates a central warehouse and many field depots that stock spare parts. The central warehouse acts as a repair facility and replenishes stock at the field depots. There is a centralized decision-maker who manages the inventory in both the central warehouse and the field depots. We develop a continuous review, base stock policy for this two-echelon, multi-item spare parts inventory system. We formulate a model to minimize the system-wide inventory cost subject to a response time constraint at each field depot. We present an efficient heuristic algorithm and study its computational effectiveness.
Original languageEnglish
Pages (from-to)655-666
Number of pages12
JournalIIE Transactions (Institute of Industrial Engineers)
Issue number7
Publication statusPublished - 1 Jul 2004

ASJC Scopus subject areas

  • Industrial and Manufacturing Engineering


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