Condition-based critical level policy for spare parts inventory management

Abstract

Abstract Condition-based maintenance is a proactive maintenance strategy where the condition of machinery is monitored. A machine is preventively maintained when it shows signs of degradation, in which case the necessary spare parts are provided from stock. However, machines may occasionally suffer from sudden shocks, or they may fail before showing any signs of deterioration. Having stock-outs in case of failures leads to costly downtimes. To avoid such downtimes, we propose a condition-based critical level policy. In this policy, preventive maintenance can be carried out such that spare parts can be consumed when the stock level is not below the critical level. In order to assess the potential impact of this policy, we develop a conceptual model for which we establish a simple numerical procedure that allows to select the optimal base-stock and critical level thresholds. We compare the operational cost under the optimal critical level policy to that under the optimal base-stock policy. The results indicate that the proposed critical level policy can indeed reduce the operational cost significantly as compared to the base-stock policy.