Spreadsheet implementable inventory control for a distribution center

This paper develops and tests a simple procedure for establishing stocking rules for a multi-component distribution center that supplies spare parts f or an equipment maintenance operation. Our basic formulation seeks to minim ize inventory investment subject to constraints on average service level an d replenishment frequency. We simplify this formulation by classifying part s according to a new ABC methodology and applying heuristics to the classic al (Q,r) model that lead to closed-form expressions for the stocking parame ters. Our numerical results show that: (1) the proposed ABC scheme does not introduce large errors provided that it is done in a manner that reflects the key parameters in the model, and (2) any of a number of simple reorder point heuristics can provide the basis for an effective spreadsheet impleme ntable system for controlling inventory in a complex multi-component enviro nment as long as the service level is checked against the exact formula.