Economic Order Quantity Model of Aircraft Turnover Parts in Aviation Industry

The inventory control of turnover parts is the key and difficult point for aircraft spare parts management, which is directly related to the benefit level of airlines in aviation industry.On the basis of considering the depreciation cost, repair cost, inventory cost and shortage cost, this paper analyzes the annual replacement times and turnover cycle, and puts forward the optimization model of Economic Order Quantity (EOQ) of aircraft turnover parts. The feasibility of the method is verified by an example. Through sensitivity analysis, it is concluded that the strong sensitive factors affecting EOQ are annual replacement times and unit shortage cost, while the purchase price has little influence on EOQ.

Replenishment of imperfect items in an EOQ inventory model with partial backordering

This paper deals with an inventory model in which a percent of the items in the lot is imperfect. The supplier is far from the buyer. After the reception of the order, immediately the products are inspected and imperfect items are identified. Due to the fact that supplier is located at long distance and the demand is needed to cover, the imperfect items are replenished by perfect ones from a local supplier at higher cost. In addition, the imperfect items are withdrawn and sold at a salvaged price as second-degree items. The shortage is allowed and partially backordered. The following three cases are considered: Case I. The reordered items are received when inventory level is zero; Case II. The reordered items are received when the backordered quantity is equal to the imperfect items quantity; and Case III. The reordered items are received when shortage is still remained. These cases are studied and analyzed in detail. In each case, the aim is to obtain the optimal value of the length period and the percent of period duration in which the inventory level is positive. A numerical example is presented to show the applicability of proposed inventory model. The results show that Case I has the lowest holding and shortage cost, so the total benefit is higher than the other two cases.

Augmented Lagrangian Approach to the Newsvendor Model with Component Commonality

Component commonality is a well-known approach in manufacturing, where the same components are used for multiple products. It has been implemented by many established companies such as Airbus, Kodak, Toyota, etc. We consider a standard two-product inventory model with a common component. The demands for the products are independent random variables. Instead of the usual approach to minimize the total shortage quantity, we propose to minimize the total shortage cost. The resulting problem is a non-convex nonlinear mathematical program. We illustrate the use of a primal-dual proximal method to solve this problem by obtaining numerically the optimal allocations of components. In particular, we show that a higher unit shortage cost induces a higher allocation.

Optimal Option Purchasing Decisions for the Risk-Averse Retailer with Shortage Cost

To hedge against potential risks, this paper introduces the conditional value-at-risk (CVaR) measure into the option purchasing for the risk-averse retailer with shortage cost. We introduce two models for the risk-averse retailer to select the optimal option purchase quantity. It is found that both two optimal option purchase quantities to two models can be decreasing in the retail price and increasing in the option executing price under certain conditions. This is different from the optimal option purchase quantity for a risk-neutral retailer to maximize the expected profit. It is found that both two optimal option purchase quantities may be increasing or decreasing in the confidence level, which implies a retailer who becomes more risk-averse may purchase more or fewer options to hedge against potential risks. Under both two optimal option purchase quantities, it is proven that the retailer’s expected profit is decreasing in the confidence level. This confirms the fact that high return implies high risk while low risk comes with low return.

Age Replacement Policies with Shortage and Excess Costs

It has been proposed in recent literatures that if replacement time is planned too early prior to failure time, a waste of operation cost, i.e., excess costs, would incur because the system might run for an additional period of time to complete critical operations; and if the replacement time is too late after failure, a great failure cost, i.e., shortage cost, is incurred due to the delay in time of the carelessly scheduled replacement. The above notion of shortage and excess costs are taken into consideration for the replacement first, replacement last and replacement overtime models in this paper. We obtain the expected cost rates and their optimum replacement times. Comparisons among these optimum times are made analytically and numerically.