Risk-based stock decisions for projects

Willem van Jaarsveld and Rommert Dekker

No EI 2009-02, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: In this report we discuss a model that can be used to determine stocking levels using the data that comes forward from a Shell RCM analysis and the data available in E-SPIR. The model is appropriate to determine stock quantities for parts that are used in redundancy situations, and for parts that are used in different pieces of equipment with different downtime costs. Estimating the annual production loss using the model consists of a number of steps. First, we need to determine which spares are used for the repairs of which failure modes. In the second step, we estimate the average waiting time for spares as a function of the number of spares stocked. In the third step, the annual downtime costs are determined. We combine the downtime costs with the holding costs to determine the optimal number of parts to stock.

Date: 2009-01-19
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