An Optimal Inventory Model for the Intermediate Echelon When Repair is Possible

The basic contribution of the paper is the development of a probabilistic model for computing the optimal purchase, i.e., stockage quantity of an item at an intermediate echelon of supply when repair of the item is possible. For commonly assumed probability distributions of the failure and repair process, it is found that the optimal stockage quantity depends to a large extent on the failure rate and is relatively insensitive to the repair rate. The model is then applied to the problem of determining the extent to which repair is economical at the intermediate echelon. It is concluded that for systems where most items deemed repairable have a low failure rate, the effectiveness of the intermediate echelon may be larger when its primary function is storage rather than repair.