Pooling separate inventories at one central location has been suggested and used, increasing service levels while decreasing the cost of inventory. But the suggestion is rarely backed up by analysis. With one exception I 0, previous research was usually based on the experiences of one or more firms (see References I, 2,3,4,5,7, 9, II), and neither presented the costs or service levels of pooled inventory systems, nor discussed their implementation and management. This paper presents a method for the evaluation of the economics of inventory pooling under a variety of assumptions, and discusses important implementation issues, as tempered by the authors' experience with several companies where inventory pooling has been used. This paper is most directly concerned with inventory systems for maintenance, repair and operating (MRO) supplies.
Inventory SystemThe general situation analyzed in this research is that of an inventory location managed as a one-stage inventory system subject to ordering, carrying and stockout costs. Under certain well known assumptions" optimal reorder points and reorder quantities that minimize the total cost of operating the inventory system can be calculated. If several inventory systems within a company or a geographical area stock the same item, combining the systems could result in both a total inventory reduction and an increase in customer service. Situations where individual inventory systems might be combined can be found within single manufacturing plants, separate plants of one company within a given geographical area, and separate plants of different companies within a given geographical area. This analysis applies primarily to inventory items with random demand. Production or MRO items with clearly established requirements would not be included.
