Planning performance based contracts considering reliability and uncertain system usage

Planning performance based contracts considering reliability and uncertain system usage

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Article ID: iaor20125255
Volume: 63
Issue: 10
Start Page Number: 1467
End Page Number: 1478
Publication Date: Oct 2012
Journal: Journal of the Operational Research Society
Authors: ,
Keywords: manufacturing industries, combinatorial optimization, programming: multiple criteria, quality & reliability
Abstract:

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.

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