Inventory systems with limited repair capacity are atfected by congestion externalities, caused by use of a shared service. There is incompatibility between individual and system optimisation in considering congestion externalities. Three models are described that investigate the congestion effect in a multi-echelon inventory system which has two modes of repair, each with a limited repair capacity. An expanding repair policy employed by the bases in order to choose which repair mode to use is described and compared with different expediting policies related to congestion externalities. The expanding repair policy that considers congestion externalities was found to lead to better system performance measurement than an expanding policy with no congestion. The results of the numerical experiment indicate that the model that ignores congestion externalities-that is, the model that measures each base as an individual — leads to poorer performance measurement for every expediting repair policy, and particularly for the optimal expediting repair policy.
- Congestion externalities
- Expediting repair
- Multi-echelon inventory control