A System Dynamics Approach to Inventory Optimization for Reducing Overstock in a Remote Mining Warehouse: A Case Study of a Spare-Parts Warehouse at a Large Mining Operation in Indonesia

Abstract

Abstract—Spare-parts warehouses in remote mining operations often carry rising inventory value even while reservations remain overdue, a pattern that points to a structural planning problem rather than a stock-availability shortage. Although previous inventory optimization studies have emphasized EOQ based optimization and forecasting techniques, limited research has examined how dynamic feedback among inventory replenishment parameters, lead-time delays and issuance performance drivers overstock condition in a remote mining warehouse with intermittent demand. This paper addresses the gap and reports a mixed-methods system dynamics case study of a spare-parts warehouse operated by a large nickel/copper mining company in Indonesia. Stock-on-hand grew from US$56.7 million in 2020 to US$77.0 million in 2024, while 3,066 of 4,652 reservation lines (66%) were overdue, 84% of which had stock already available. A causal-loop and stock-and-flow model, calibrated on 2020-2024 SAP data and semi-structured interviews, was simulated in Vensim through 2030. The baseline model projects inventory rising from US$39.9 million (2025) to US$81.9 million (2030), concentrated in slow- and non-moving items whose replenishment is driven 72% by static reorder-point/maximum (ROP/Max) settings rather than reservation demand. Three intervention scenarios were tested: reducing ROP/Max by 50%, raising the outgoing (issuance) rate to 0.5, and combining both. The combined scenario cut projected 2030 inventory to US$55.2 million, a 32.6% reduction, outperforming either single-lever intervention. The study concludes that overstock in intermittent-demand mining warehouses should be addressed through segmented, service-level-based replenishment policies rather than uniform stock-reduction targets.

Keywords—inventory optimization; system dynamics; spare-parts inventory; reorder point and maximum (ROP/Max) policy; intermittent-demand forecasting; mining warehouse operations