Integrated Location-Inventory Optimization in Spare Parts Networks

Patrick Zech ()
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Patrick Zech: Technische Universität München

A chapter in Operations Research Proceedings 2016, 2018, pp 37-42 from Springer

Abstract: Abstract This research work is concerned with integrated location-inventory optimization in spare parts networks. A semi-Markov decision process (SMDP) is developed, formulated as linear program (LP) and finally, embedded into a set-covering problem framework. The resulting model is a mixed integer linear program (MILP) which integrates (1) strategic facility choice, (2) tactical base-stock level setting and (3) operational sourcing decisions. Due to the integration of these decision stages, physical and virtual inventory pooling opportunities can be evaluated at the same time. Experimental results emphasize the value of the integrated model compared to the sequential ‘location first, inventory and sourcing second’ approach. The cost savings are particularly high in networks with low fixed facility location cost, high shipment cost and high demand rates as virtual inventory sharing opportunities increase in these cases.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:oprchp:978-3-319-55702-1_6

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DOI: 10.1007/978-3-319-55702-1_6

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