A Stock Control Policy for Important Spares in a Two Level Stores System

Abstract

This paper describes the results of an investigation to determine correct re-order levels and order quantities. The problem had three important features:

1. a simple stock control system was required for about 15,000 items;

2. run-out costs needed to be estimated;

3. the solution required best stock levels and order quantities for a central store and for smaller stores supplied by it.

The problem arose because it was felt that production delays were being caused by the stores too frequently being unable to supply spares.

Items were grouped by their importance and portability. Average run-out costs were estimated for each group. An approximate model of the two level stock holding problem was derived. An iterative process was required to obtain solutions.

It was observed that the stock control rules were insensitive to run-out cost, and that items of equal run-out cost had widely differing run-out probabilities. This indicates that, in this case, it is invalid to group items by importance and to assign fixed run-out probabilities to each group.

¹(National Coal Board)

^†Now with Richard Thomas and Baldwins Ltd.

^‡Now with I.C.I. Ltd.

¹(National Coal Board)

^†Now with Richard Thomas and Baldwins Ltd.

^‡Now with I.C.I. Ltd.