Two-period stochastic inventory model for critical spare parts of thermal power plants

Date of Publication


Document Type

Master's Thesis

Degree Name

Master of Science in Industrial Engineering

Subject Categories

Industrial Engineering | Industrial Technology


Gokongwei College of Engineering


Industrial Engineering

Thesis Adviser

Antonio Medina

Defense Panel Chair

Dr. Cleta Milagros Acebedo

Defense Panel Member

Rolando Ramon Diaz
Edgar Castro


This study is an attempt to bridge the gap between the ultra-simple inventory models having little relevance in the actual application and the sophisticated mathematical theory concerned with inventory control currently appearing in many literatures. Specifically, the study focus on the inventory control of thermal power plant's critical spare parts operating in a grid arrangement for electric power utility. Criticality in this study is represented in terms of total plant shutdown whenever stockout for the subject spare parts occurs which are not available locally. In order to realistically illustrate the local scenario in which the electric power industry is operating, the combined effect of electricity demand and breakdown occurrence relative to the two known season (wet and dry) is incorporated in the model. Introduction of restoration cost and incidental cost is made in order to approximate the true value of the critical spare parts in the overall plant operation. The possibility of having identical spare parts in the inventory was also considered by defining the demand per period as the sum of individual demand (convolution) of the components using the same spare parts (commonality aspect). The only functional constraint considered was the budgetary limitation in the procurement of the critical spare parts. This is to emphasize the tight financial status the electric power industry is currently experiencing.

The resulting mathematical model was proven to be convex by the use of Hessian matrix and an approximate solution was shown in the numerical sample in order to illustrate the applicability of the model. The Kuhn-Tucker conditions which was based on the Lagrangian method was used in determining the optimum value. In the final analysis, it is the intention of this study to pave the way for a better inventory management of critical spare parts, and for the top management to include in their policy formulation the importance of this item in the overall company operation.

Abstract Format






Accession Number


Shelf Location

Archives, The Learning Commons, 12F Henry Sy Sr. Hall

Physical Description

142 leaves


Stochastic processes; Inventory control; Mathematical model; Electric power-plants -- Equipment and supplies; Spare parts; xx5 Maintenance -- Equipment and supplies

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