Inventory Management of Spare Parts in an Energy Company

Posted: 9 Jun 2012

See all articles by Mario Guajardo

Mario Guajardo

Norwegian School of Economics (NHH) - Department of Business and Management Science

M. Rönnqvist

Norwegian School of Economics (NHH) - Department of Finance

Ann Mari Halvorsen

Statoil

Svein Inge Kallevik

Statoil

Date Written: June 8, 2012

Abstract

We address a problem of inventory management of spare parts in the context of a large energy company, producer of oil and gas. Spare parts are critical for assuring operational conditions in offshore platforms. About 200,000 different items are held in several inventory plants. The inventory system implemented at the company corresponds to a min-max system. The control parameters are decided based mainly on the expert judgment of the planners. Also, though the inventory plants can in practice be supplied from each other, the inventory planning is performed separately by the plant planners. This is because of different ownership structures where the studied company has the operative responsibility. The company is pursuing a system in which all planners conform to the same inventory management approach and evaluation, as well as being more cost efficient. Our work focuses on supporting this goal. We apply methods to decide the inventory control parameters for this system under a service level constraint. The methodology we use distinguishes unit-size and lot-size demand cases. We perform computational experiments to find control parameters for a sample of items. After the control parameters are found, we use them to explore the impact of risk pooling among the plants and inaccuracy arising from duplicate item codes.

Keywords: Inventory of spare parts, risk pooling, duplicates, inventory inaccuracy, OR in the oil and gas sector

JEL Classification: Q00, Q30

Suggested Citation

Guajardo, Mario and Ronnqvist, Mikael and Halvorsen, Ann and Kallevik, Svein, Inventory Management of Spare Parts in an Energy Company (June 8, 2012). NHH Dept. of Finance & Management Science Discussion Paper, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2080041

Mario Guajardo (Contact Author)

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Mikael Ronnqvist

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

Ann Halvorsen

Statoil ( email )

Norway

Svein Kallevik

Statoil ( email )

Norway

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