Inventory Optimization for Mercurius Shipping Group's Container-Crane Vessels

Abstract

Mercurius Shipping Group invested in two container-crane vessels which are able to load and unload cargo to and from its holds. Due to their unique feature, the crane, failure of the vessels results in large financial consequences. Previous experience showed that these costs could be mitigated with easily/timely available spare-parts. The main aim of this study was to increase the reliability of Mercurius Shipping Group's container-crane vessel MKS Mercurius by proposing an optimized spare-part inventory. Subsequently, by doing so, reducing the total costs of operating and maintaining the vessel and ensuring profit maximization for MSG. Cost models have been developed to quantify the reduction in financial risk of failures, by having spare-parts directly available, and to determine the costs of keeping a spare-part inventory. As a result a list of spare-parts is proposed based on a comparison between the reduced failure impact/costs (benefit), with a spare-part in inventory, and the corresponding annual inventory costs. The results showed that a cost-effective improvement to vessel reliability, due to a decrease in vessel downtime, can be achieved with direct availabiltiy of spare-parts kept in inventory. Currently equipped with two container-crane vessel the optimum inventory consists of 13 components, requiring an investment of €50,000 and leading to an improvement to the vessels financial performance of €13,000 per year. In case MSG decides to relocate one of the container-crane vessels, the impact of failure increases. In this case the recommended inventory should be expanded to 28 components, requiring an investment of €137,000 and leading to an improvement to the vessels financial performance of €55,000 per year.