This paper presents a case study of applying a Bayesian approach to forecast demand and subsequently determine the appropriate parameter S of an (S-1,S) inventory system for controlling spare parts of electronic equipment. First, the problem and the current policy are described. Then, the basic elements of the Bayesian approach are introduced and the procedure for calculating the appropriate parameter S is illustrated. Finally, we present the results of applying the Bayesian approach in an innovative way to determine the stock levels of three types of circuit packs at several locations. According to the proposed method, a lower base stock than the one currently used is sufficient to achieve the desired service level.

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Econometric Institute Research Papers
Erasmus School of Economics

Aronis, K.-P., Magou, I., Dekker, R., & Tagaras, G. (1999). Inventory control of spare parts using a Bayesian approach: a case study (No. EI 9950-/A). Econometric Institute Research Papers. Retrieved from