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An inventory control project in a major Danish company using compound renewal demand models

Research output: Working paperResearch


  • L 2007 02

    Final published version, 261 KB, PDF document

  • Department of Business Studies
  • CORAL - Centre for Operations Research Applications in Logistics
 We describe the development of a framework to compute the optimal inventory policy for a large spare-parts' distribution centre operation in the RA division of the Danfoss Group in Denmark. The RA division distributes spare parts worldwide for cooling and A/C systems. The warehouse logistics operation is highly automated. However, the procedures for estimating demands and the policies for the inventory control system that were in use at the beginning of the project did not fully match the sophisticated technological standard of the physical system. During the initial phase of the project development we focused on the fitting of suitable demand distributions for spare parts and on the estimation of demand parameters. Demand distributions were chosen from a class of compound renewal distributions. In the next phase, we designed models and algorithmic procedures for determining suitable inventory control variables based on the fitted demand distributions and a service level requirement stated in terms of an order fill rate. Finally, we validated the results of our models against the procedures that had been in use in the company. It was concluded that the new procedures were considerably more

consistent with the actual demand processes and with the stated objectives for the

distribution centre. We also initiated the implementation and integration of the new

procedures into the company's inventory management system.

Original languageEnglish
Place of publicationAarhus
PublisherAarhus School of Business, Aarhus University, Department of Business Studies
Number of pages26
ISBN (Electronic)87-7882-182-7
Publication statusPublished - 2007

    Research areas

  • Base-stock policy, compound distribution, fill rate, inventory control,

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