Planning performance based contracts considering reliability and uncertain system usage

This paper investigates a novel quantitative approach for planning and contracting performance-based logistics in the presence of uncertain system usage. Our efforts focus on an integrated service delivery environment where the manufacturer develops capital-intensive systems and also provides after-...

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Bibliographic Details
Published in:The Journal of the Operational Research Society 2012-10, Vol.63 (10), p.1467-1478
Main Authors: Jin, T, Wang, P
Format: Article
Language:English
Subjects:
Applied sciences
Business and Management
Business metrics
Capital costs
Cost analysis
Decision theory. Utility theory
Exact sciences and technology
Failure
General Paper
General Papers
Industrial design
Inventories
Inventory
Literature reviews
Logistics
Management
Manufacturing
Minimization of cost
Naval fleets
OEM
Operational research and scientific management
Operational research. Management science
Operations research
Operations Research/Decision Theory
Optimization
performance based contracting
Performance metrics
performance-based outcome
post-production support
power by the hour
Production costs
Profit margins
Random variables
reliability
Reliability theory. Replacement problems
service parts logistics
Spare parts
Suppliers
Unit costs
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Description
Summary:This paper investigates a novel quantitative approach for planning and contracting performance-based logistics in the presence of uncertain system usage. Our efforts focus on an integrated service delivery environment where the manufacturer develops capital-intensive systems and also provides after-sales support. We propose an analytical model to characterize system operational availability by comprehending five performance drivers: inherent failure rate, usage rate, spare parts inventory, repair time, and the fleet size. This analytical insight into the system performance allows the service supplier to minimize the total cost across system design, production, maintenance, and repair. Two contracting schemes are investigated under cost minimization and profit maximization schemes. For the first time in literature, reliability design and service parts logistics are seamlessly integrated into one decision support model for improving operational availability while lowering the lifecycle cost. Numerical examples are provided to demonstrate the applicability and the effectiveness of the proposed decision support tool.
ISSN:0160-5682
1476-9360
DOI:10.1057/jors.2011.144