An adaptive base stock policy for repairable item inventory control

This paper presents an adaptive base stock policy for a repairable item inventory control problem. Base stock level of a repairable item is updated based on the work-in-process (WIP) inventory level in repair facility with update frequency modeled as a separate tactical control parameter together with a standard base stock level. Stock-out situations are handled by emergency shipments, and priority shipments are used when updating the base stock level. A single-item single-location problem is considered, with repair facility having a limited capacity, and the problem is modeled by a two-dimensional continuous-time Markov chain, which is then solved explicitly by using matrix geometric methods. Numerical results are provided that show, for a given downtime target, the new policy achieves substantial reduction in inventory on-hand and significant saving in total cost.