Efficient multi-level inventory optimization algorithm based on marginal analysis

As a classic model to solve the problem of multi-level inventory modeling, the METRIC model has a wide range of applications in both the civilian and military fields. METRIC is a systematic approach for inventory allocating of spare parts, which has obvious advantages over the item approach. The model commonly adopts the marginal analysis method to get an optimal inventory plan, which has a high accuracy. However, the marginal analysis method needs much calculation time, which is a serious problem that we cannot ignore. We develop and validate a heuristic algorithm for improving the computational efficiency of marginal analysis method in this paper. The accuracy and effectiveness of the proposed algorithm are analyzed through a numerical study. The algorithm shows a 62.97% improvement in computational efficiency while keeping 99.74% accuracy.