112 IEEE TRANSACTIONS ON RELIABILITY, VOL. 52, NO.

1, MARCH 2003

Joint Optimization of Block-Replacement and

Periodic-Review Spare-Provisioning Policy
Alenka Brezavsc ek and Alenka Hudoklin

AbstractThis paper considers the problem of joint optimiza- NOTATION

tion of preventive maintenance and spare-provisioning policy
for system components subject to wear-out failures. A stochastic PR interval, cycle length
mathematical model is developed to determine the jointly optimal part of a cycle of length where the inventory level
block replacement and periodic review spare-provisioning 0
policy. The objective function of the model represents the -ex- part of a cycle of length where the inventory level
pected total cost of system maintenance per unit time, while the
preventive replacement interval and the maximal inventory level
0
are chosen as the decision variables. The objective function of the stock reorder interval
model is in an analytic form with parameters easily obtainable maximal inventory level
from field data. -expected inventory level just after realization of
The model has been tested using field data on electric locomo- planned PR
tives in Slovenian Railways. The calculated optimal values of the
model decision variables are realistic. Sensitivity analysis of the
number of -identical components in the system
model shows that the model is relatively insensitive to moderate pdf for component failure time
changes of the parameter values. Laplace transform of
The results of testing and of sensitivity analysis of the model , mean and standard deviation of
prove that a trade-off exists between the replacement related cost Cdf of
and the inventory related cost. The jointly optimal preventive
replacement interval defined by this model differs appreciably
component renewal function
from the corresponding interval determined by the conventional : component renewal density
model where only replacement related costs are considered. Also, number of component CR during , when the
the results of the sensitivity analysis show that even minor modi- system has only 1 component of a given type
fication of the value of each model decision variable (without the number of component CR during , when the
appropriate adjustment of the value of the other decision variable)
can lead to important increase of the -expected total cost of
system has components of a given type
system maintenance. This indicates that separate optimization of pdf for
preventive maintenance policy and spare-provisioning policy does procurement lead time
not ensure minimal total cost of system maintenance. -expected total cost of system maintenance per unit
This model can be readily applied to optimize maintenance pro- time
cedures for a variety of industrial systems, and to upgrade main-
tenance policy in situations where block replacement preventive
-expected replacement cost in a cycle of length
maintenance is already in use. -expected inventory cost in a cycle of length
-expected ordering cost in a cycle of length
Index TermsBlock replacement, industrial system, joint
optimization, periodic review, preventive maintenance, spare-
-expected holding cost in a cycle of length
provisioning, system component, wear-out failure. -expected shortage cost in a cycle of length
, cost of component PR, CR
set-up cost for placing an order
ACRONYMS1 cost of a spare purchased
BR block replacement holding cost per spare per unit time
CR corrective replacement downtime cost due to shortage of spares per compo-
DV decision variable nent per unit time
PM preventive maintenance -expected value of any variable
PR preventive replacement. variance of any variable.

I. INTRODUCTION

Manuscript received December 5, 2000; revised August 17, and September

28, 2001. Responsible Editor: J.-C. Lu.
The authors are with the University of Maribor, Faculty of Organizational
Sciences, Kidriceva cesta 55a, 4000 Kranj, Slovenia (e-mail: Alenka.Breza-
vscek@fov.uni-mb.si).
Digital Object Identifier 10.1109/TR.2002.805790
1The singular and plural of an acronym are always spelled the same.
0018-9529/03$17.00 2003 IEEE
S YSTEMS used in the production of goods and/or in the de-
livery of services constitute the vast majority of most in-
dustrys capital. These systems are subject to deterioration with
usage and age that often leads to higher production cost. A major
portion of the total system production cost represents the cost
of system maintenance [1]. To keep the maintenance cost down,
PM is performed on systems and their components.
BREZAVS CEK
AND HUDOKLIN: JOINT OPTIMIZATION OF BLOCK-REPLACEMENT AND PERIODIC-REVIEW SPARE-PROVISIONING POLICY
Maintenance policies for systems that are subject to dete-
rioration have been treated extensively in the literature, e.g.,
[2][5]. The literature-authors usually assume that whenever a
system component is to be replaced, a new component is imme-
diately available. This implies either that components are highly
standardized so that the manufacturer can readily procure them
off-the-shelf from a supplier, or that they are so inexpensive that
the manufacturer can store large inventories of spares as protec-
tion against system failures. However, system components that
are prone to failure are often both expensive and highly cus-
tomized, and the procurement lead time is nonnegligible. This
implies that the PM and the spare-provisioning policies must
be closely coupled, because separate treatment of them will not
result in the global optimal maintenance policy. Some authors
have studied the effect of the spare-provisioning policy on the
PM policy, but from a practical view-point, their contributions
have several drawbacks such as:
the procurement lead time is assumed to be negligible, e.g.,
[6], [7],
the mathematical model is not given analytically, e.g., [8],
[9],
the number of system components and/or the maximal in-
ventory level is limited to a predetermined fixed value, e.g., [10],
[11].
This paper presents a stochastic mathematical model that en-
ables joint optimization of the PR policy, known as BR policy
(e.g., [12]), and of the periodic review spare-provisioning
policy, (e.g., [13]). The objective function of the model is
given in an analytic form with the PR interval and the maximal
inventory level as the DV. No restriction is imposed on values
of the DV and on the number of system components. The
procurement lead time is also considered.
Model Assumptions
1) The procurement lead time, , is constant and shorter than
the PR interval .
2) The procurement lead time, , is -independent of the
quantity of spares being ordered.
3) There is no quantity discount; thus the spare cost, , does
not depend on the ordered quantity.
4) The inventory of spares for a given component type is re-
plenished entirely -independently of inventories of spares for
other types of system components.
5) The holding cost in a given cycle is proportional to the part
of this cycle where the inventory-level 0, and to the average
inventory on hand during this cycle (viz, the average number of
spares physically located in the inventory during the cycle).
6) The shortage cost in a given cycle is proportional to the cu-
mulative component downtime due to shortage of spares during
this cycle.
7) During the cycle, the inventory level decreases linearly.
II. DESCRIPTION OF SYSTEM MAINTENANCE
Consider a system of -independent components of a given
type. The components are subject to wear-out failures, so the
component failure rate increases with time.
113
Fig. 1. Variation of the inventory level over time.
Maintenance of the system is performed according to the
BR policy: If spares are available, the failed component is re-
placed immediately on failure, while all operating compo-
nents are replaced at predetermined time intervals of length .
The replacement time is negligible. If spares are not available,
the components are replaced as soon as the inventory of spares
is replenished. The downtime of any of components due to
shortage of spares (time between the moment of the component
failure and the next order arrival) represents a loss of the system
operational time.
The inventory of spares is replenished at a single location
according to the periodic review inventory policy. Under
the BR policy it is reasonable to choose the reorder points at
equidistant time instants , (see assumption
#1). At each reorder point, enough spares are ordered to bring
the inventory level up to .
III. MATHEMATICAL MODEL FOR JOINT OPTIMIZATION OF BR
AND OF PERIODIC REVIEW SPARE-PROVISIONING POLICY
A. Preliminaries
Demand for spares during a given time interval, and conse-
quently, variation of the level of spares in the inventory, depends
on the number of component CR and PR in this interval. Fig. 1
illustrates the variation of the inventory level over time. The
solid curve represents the inventory level; the dashed curve rep-
resents the inventory position (the inventory level that includes
the amount of spares ordered but not yet received). Fig. 1 can be
viewed as a series of cycles; cycle is defined as the time be-
tween receipt of consecutive orders. The cycle length is there-
fore equal to the PR interval .
Fig. 1 shows that there are two possible variants of a cycle:
1) Excess of spares: The actual demand for spares during a
cycle , as shown in Fig. 2.
2) Shortage of spares: The actual demand for spares during
a cycle , as shown in Fig. 3.
Fig. 2 shows that excess of spares occurs when .
Similarly, Fig. 3 shows that shortage of spares occurs when
.
The is a random variable with pdf . When , of the
system under consideration, is relatively large (for complex in-
114 IEEE TRANSACTIONS ON RELIABILITY, VOL. 52, NO. 1, MARCH 2003

The can be also calculated from:

(1)

For practical purposes, it is usually enough to take in (1) only

the first few convolutions of , e.g., the first 5 convolutions
for the Weibull family, [15]. However, calculation of the convo-
lutions of is simple only for the -normal pdf and for the
Gamma pdf with an integer . In these cases, the convolutions
Fig. 2. Excess of spares during a cycle.
of are of the same type as the original . For any other
type of pdf that can be used for computations in the wear-out
period this calculation is rather tedious.
Therefore is calculated according to the recurrence re-
lation [12]:

(2)

The length of each interval , , in (2)

must be made sufficiently short so that no more than 1 compo-
nent failure can occur within any interval.
Calculation of according to (2) is quite simple, irre-
spective of the type of the , and of the values of its param-
Fig. 3. Shortage of spares during a cycle.
eters (integer or not).
The that is used to determine the standard deviation
of can be obtained as follows [7]:
dustrial systems this is usually true), the could be approx-
imated by the -normal pdf with mean and
standard deviation (3)

The renewal density in (3) is obtained by numerical differenti-

The of component CR as a function of can be described
by the ordinary renewal process. is therefore equal to the
value of in time . In principle, can be determined
by calculating the inverse Laplace transform of
Unfortunately, although one can find simple expressions for the
for various types of , the can be exactly in-
verted only in simple cases [14]. The exact inversion of
for pdfs that can describe the failure time distribution in the
wear-out period is hardly ever obtainable. An exception repre-
sents the Gamma pdf where the inversion of in simple
terms can be done for some integer values of , e.g.,
This is probably the reason why the Gamma pdf with is
often used in the literature, e.g., [6], [7]. Unfortunately, a failure
time distribution obtained empirically rarely fits the pdf with
predetermined parameter values.
ation of the discrete function (2). The definite integral in (3) is
solved numerically using the trapezoidal rule.
B. Model Development
The jointly optimal BR and periodic review spare-provi-
sioning policy is defined by the optimal values of the following
DV:
PR interval ,
maximal inventory-level .
To determine these values, a stochastic mathematical model is
developed.
The objective function of the model represents the -expected
total cost of system maintenance per unit time:
. (4)
The is calculated using:
(5)
BREZAVS CEK
AND HUDOKLIN: JOINT OPTIMIZATION OF BLOCK-REPLACEMENT AND PERIODIC-REVIEW SPARE-PROVISIONING POLICY 115

The consists of the -expected ordering cost, -expected firmed by the results of model testing using the actual data (see
holding cost, and -expected shortage cost in a cycle. The 3 el- Section III-C).
ements of are determined as follows: The is the sum of the costs calculated by (6)(8). Finally,
1) The is calculated as: the objective function of the model can be written according to
(4) as:
(6)

2) Immediately after receipt of the spares ordered, spares

are used for the PR of the operating components (see Fig. 1).
These spares cause practically no holding cost. Therefore, in
calculating the -expected holding cost in a cycle, only spares
needed for the CR are considered.
Considering assumption #5, the holding cost in a given cycle
depends upon the within this cycle, and upon the average
inventory on hand during this cycle. Fig. 2 shows that when there
is no shortage of spares, then , and the average inventory
on hand during the cycle is . Under assumption #7
(illustrated with the solid line in Fig. 3) it can be derived that in a
shortage of spares, , and the average inventory
on hand during the cycle is .
Considering both possible variants of a cycle, the can be
written as:
(7)
3) Shortage cost exists when the variant 2 of a cycle is realized
(see Fig. 3). Considering assumption #6, this cost depends upon
the cumulative component downtime due to shortage of spares
during the cycle. According to assumption #7, its average value
is
The in a cycle, allowing for both possible variants of a
cycle, can be expressed as:
if
otherwise.
(8)
Because the components under consideration operate within the
wear-out period, the inventory level decreases with time ac-
cording to a concave function. Therefore, assumption #7, used
in (7) and (8), implies that the calculated value of is a little
shorter (and never longer) than the actual one. Consequently,
the calculated value of is a little longer (and never shorter)
than the actual one. This means that the determined by the
model, will be higher than needed. Because the downtime cost
due to shortage of spares per component per unit time is usually
much higher than the cost of holding 1 spare in the inventory per
unit time, then moderate overstocking would not appreciably af-
fect the total cost of system maintenance. This reasoning is con-
(9)
Optimal values of the DV, and , that minimize the -expected
total system maintenance cost per unit time are calculated by an
iterative procedure described in detail in [16].
C. Model Testing
The model in Section III-B has been tested using the field data
on electric locomotives in Slovenian Railways. All locomotives
of a given type have been treated as a system. Optimal main-
tenance policy for the arcing chamber, as an important system
component, has been defined.
The system comprises 30 electric locomotives of the same
type, and working in a similar regime. Each locomotive contains
4 -identical arcing chambers operating in series. To fulfill the
market demand, all 30 locomotives must be in operating con-
dition. A failure of any arcing chamber leads to a degradation
failure of the system and causes high financial losses.
The following values of the model parameters have been ob-
tained from the system field data:
.
is -normal. The values of parameters of are ob-
tained on the basis of a sample of 7 component times-to-failure
occurring in the 6-month period: weeks,
weeks.
weeks.
units.
units.
units.
units.
units/week.
units/week.
The optimal values of the DV, and , have been calculated
using the iterative procedure in [16]. For each value of an
appropriate value of has been determined. The has been
calculated according to the (9); the results are in Table I.
It can be deduced from Table I that the jointly optimal BR
and spare-provisioning policy for the arcing chambers can be
described as follows:
Failed components are replaced immediately on failure,
while every 23 weeks all 120 components are replaced
preventively.
116
TABLE I
DEPENDENCE OF THE s-EXPECTED TOTAL COST OF SYSTEM MAINTENANCE PER
T
ON THE PR INTERVAL AND THE MAXIMAL INVENTORY LEVEL
12 weeks before planned PR, 135 spares are ordered.
120 spares are reserved for the PRs, and 15 spares are used
for the CRs.
The actual PR interval is 24 weeks, and the annual
demand is approximately 300 spares. These data are in
reasonably good agreement with our results although the
maintenance procedures currently in use are based solely on
experience.
It is interesting to compare the optimal PR interval, calcu-
lated according to this model, with the corresponding interval
calculated considering only the replacement related cost. In
the latter case, the optimal PR interval is 20 weeks. The dif-
ference between the two optima is nearly 13%. This indicates
that a trade-off exists between the replacement related cost
and the inventory related cost.
It has also been tested how the presumption of linear
decreasing of the inventory level during a cycle affects the
optimal solution. The length of the part of the cycle
has been increased by 10% and 20%, and the new optimal
solutions have been determined. The results are shown in
Table II.
Table II shows that the effect of increase of on the is
negligible. Therefore, one can conclude that the presumption of
linearity does not appreciably affect the optimal solution.
IEEE TRANSACTIONS ON RELIABILITY, VOL. 52, NO. 1, MARCH 2003
UNIT TIME, C ,
S
TABLE II
EFFECT OF THE PRESUMPTION OF LINEAR DECREASING OF THE INVENTORY
LEVEL DURING A CYCLE ON THE OPTIMAL SOLUTION
D. Sensitivity Analysis
Sensitivity analysis for the model has been done. Its purpose
is to explore:
the effects of potential changes of the values of the model
parameters on the optimal solution (the optimal values of the
DV and the optimal value of the objective function);
the effects of potential changes of the optimal values of the
DV on the value of the objective function.
Tables III and IV shows the results of the sensitivity analysis
of the model; Table III shows the effect of a 10% change of
the value of the particular model parameter, while the values of
all other parameters are constant. The changes of the values of
mean and standard deviation determining have caused the
greatest change of the optimal solution. The 10% change of the
values of other parameters was virtually negligible.
BREZAVS CEK
AND HUDOKLIN: JOINT OPTIMIZATION OF BLOCK-REPLACEMENT AND PERIODIC-REVIEW SPARE-PROVISIONING POLICY
TABLE III
EFFECT OF 10% CHANGES OF THE VALUES OF THE MODEL PARAMETERS ON THE OPTIMAL SOLUTION
TABLE IV
EFFECT OF 10% CHANGES OF THE OPTIMAL VALUES OF THE DV ON
THE VALUE OF THE OBJECTIVE FUNCTION
The results in Table IV show the effect of 10% changes of the
optimal values of the DV on the value of the objective function.
Table IV shows that even minor modification of the value of
each DV (without the appropriate adjustment of the value of the
other DV) can lead to an important increase of the -expected
total system maintenance cost. This indicates that separate op-
timization of the DV does not ensure the global optimum of the
model objective function.
ACKNOWLEDGMENT
The authors would like to thank M. Miklavcic and other per-
sonnel in Slovenian Railways who have provided all data needed
for testing the model.
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Alenka Brezavsc ek (born 1967) received the B.S. in 1992, the M.S. in 1996,
and the Ph.D. in 2000 from the University of Maribor. She works as an Assistant
at the University of Maribor, Faculty of Organizational Sciences in the field of
stochastic processes, system reliability and availability, and information system
security.
Alenka Hudoklin (born 1935) received the B.S. in 1958, the M.S. in 1968, and
the Ph.D. in 1969 from the University of Ljubljana. She works as a Professor
at the University of Maribor, Faculty of Organizational Sciences in the field of
stochastic processes, system reliability and availability, and information system
security.