On the demand distributions of spare parts

Abstract

Spare parts have become ubiquitous in modern societies, and managing their requirements is an important and challenging task with tremendous cost implications for the organisations that are holding relevant inventories. Demand for spare parts arises whenever a component fails or requires replacement, and as such the relevant patterns are different from those associated with ‘typical’ stock keeping units. Such demand patterns are most often intermittent in nature, meaning that demand arrives infrequently and is interspersed by time periods with no demand at all. A number of distributions have been discussed in the literature for representing these patterns, but empirical evidence is lacking. In this paper, we address the issue of demand distributional assumptions for spare-parts management, conducting a detailed empirical investigation on the goodness-of-fit of various distributions and their stock-control implications in terms of inventories held and service levels achieved. This is an important contribution from a methodological perspective, since the validity of demand distributional assumptions (i.e. their goodness-of-fit) is distinguished from their utility (i.e. their real-world implications). Three empirical datasets are used for the purposes of our research that collectively consist of the individual demand histories of approximately 13,000 SKUs from the military sector (UK and USA) and the Electronics Industry (Europe). Our investigation provides evidence in support of certain demand distributions in a real-world context. The natural next steps of research are also discussed, and these should facilitate further developments in this area from an academic perspective.

Keywords:

• demand distributions
• inventory
• spare parts management
• empirical study

Acknowledgements

The research described in this paper has been partly supported by the Royal Society, UK (2007/Round 1, Int. Incoming Short Visits – North America). In addition, we would like to acknowledge the financial support provided by DePaul University that allowed a research visit by Aris Syntetos to DePaul in 2010.