End-of-life inventory control of aircraft spare parts under performance based logistics

We consider an inventory control problem of aircraft spare parts during the end-of-life (EOL) phase of fleet operations. For these spare parts, demand rates vary with the diminishing number of operational aircraft, as the aircraft retire out of service. As aircraft approach to the EOL phase, managing the spare parts supply chain becomes more challenging and costly. Before entering the EOL period, the aircraft manufacturer typically requires its customers to place final purchase orders for spare parts for the remaining lifetime of the aircraft. For this problem, we present an algorithm that computes the optimal final order size of components under a budget constraint. By modeling the remaining part inventory as a continuous-time Markov chain, we develop analytical solutions using differential equations for single and two-item cases. After observing numerical difficulty for the multi-item case, we employ a simulation-optimization with a gradient search method. The algorithm finds the spares requirement of aircraft components during the EOL period with aircraft availability which serves as a useful performance metric during the spare part supply chain management under a performance-based logistics (PBL) environment.