Exploring incomplete information in maintenance materials inventory optimization Antti Puurunen, Jukka Majava and Pekka Kess Industrial Engineering and Management, University of Oulu, Oulu, Finland Abstract Purpose – Ensuring the sufficient service level is essential for critical materials in industrial maintenance. This study aims to evaluate the use of statistically imperfect data in a stochastic simulation-based inventory optimization where items’ failure characteristics are derived from historical consumption data, which represents a real-life situation in the implementation of such an optimization model. Design/methodology/approach – The risks of undesired shortages were evaluated through a service-level sensitivity analysis. The service levels were simulated within the error of margin of the key input variables by using StockOptim optimization software and real data from a Finnish steel mill. A random sample of 100 inventory items was selected. Findings – Service-level sensitivity is item specific, but, for many items, statistical imprecision in the input data causes significant uncertainty in the service level. On the other hand, some items seem to be more resistant to variations in the input data than others. Research limitations/implications – The case approach, with one simulation model, limits the generalization of the results. The possibility that the simulation model is not totally realistic exists, due to the model’s normality assumptions. Practical implications – Margin of error in input data estimation causes a significant risk of not achieving the required service level. It is proposed that managers work to improve the preciseness of the data, while the sensitivity analysis against statistical uncertainty, and a correction mechanism if necessary, should be integrated into optimization models. Originality/value – The output limitations in the optimization, i.e. service level, are typically stated precisely, but the capabilities of the input data have not been addressed adequately. This study provides valuable insights into ensuring the availability of critical materials. Keywords Inventory optimization, Maintenance materials, Service-level sensitivity, Spare parts, StockOptim Paper type Research paper 1. Introduction Intensifying competition and modern management philosophies drive companies to find ways to reduce working capital tied to business operations, including maintenance materials inventories (Eroglu and Hofer, 2010). The maintenance function is developing rapidly, and the progress of maintenance concepts over the years can described as follows (Ahuja, 2009): The current issue and full text archive of this journal is available at www.emeraldinsight.com/0263-5577.htm The authors are grateful to Mr Joel Turpela as well as to the personnel of the case company for the excellent cooperation. Received 14 January 2013 Revised 11 March 2013 14 August 2013 3 September 2013 Accepted 5 September 2013 Industrial Management & Data Systems Vol. 114 No. 1, 2014 pp. 144-158 q Emerald Group Publishing Limited 0263-5577 DOI 10.1108/IMDS-01-2013-0025 IMDS 114,1 144