Multilevel rationing policy for spare parts when demand is state dependent

Official URL: http://dx.doi.org/10.1007/s00291-018-0518-2

The multilevel rationing (MR) policy is the optimal inventory control policy for single-item M / M / 1 make-to-stock queues serving different priority classes when demand rate is constant and backlogging is allowed. Make-to-repair queues serving different fleets differ from make-to-stock queues because in the setting of the former, each fleet comprises finitely many machines. This renders the characterization of the optimal control policy of the spare part inventory system difficult. In this paper, we implement the MR policy for such a repair shop/spare part inventory system. The state-dependent arrival rates of broken components at the repair shop necessitate a different queueing-based solution for applying the MR policy from that used for make-to-stock queues. We find the optimal control parameters and the cost of the MR policy; we, then compare its performance to that of the hybrid FCFS and hybrid priority policies described in the literature. We find that the MR policy performs close to the optimal policy and outperforms the hybrid policies.