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Learning effects on maintenance outsourcing

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  • Tarakci, Hakan
  • Tang, Kwei
  • Teyarachakul, Sunantha
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    Abstract

    The objective of this paper is to study learning effects on maintenance outsourcing. We consider a situation in which a manufacturer offers a short-term outsourcing contract to an external contractor who is responsible for scheduling and performing preventive maintenance and carrying out minimal repairs when the process fails. The manufacturer's payment to the contractor consists of a fixed amount along with cost subsidization for each maintenance operation performed. We assume learning occurs when the contractor performs preventive maintenance that reduces both time and cost. Two types of learning are considered: natural learning and learning by costly efforts. We demonstrate that a well-designed payment scheme can induce the contractor to adopt the maintenance schedule that maximizes the manufacturer's profit.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 192 (2009)
    Issue (Month): 1 (January)
    Pages: 138-150

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    Handle: RePEc:eee:ejores:v:192:y:2009:i:1:p:138-150

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    Web page: http://www.elsevier.com/locate/eor

    Related research

    Keywords: Maintenance outsourcing Learning Cost subsidization;

    References

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    1. Linda Argote & Sara L. Beckman & Dennis Epple, 1990. "The Persistence and Transfer of Learning in Industrial Settings," Management Science, INFORMS, vol. 36(2), pages 140-154, February.
    2. Wang, F. -K. & Lee, W., 2001. "Learning curve analysis in total productive maintenance," Omega, Elsevier, vol. 29(6), pages 491-499, December.
    3. Erica L. Plambeck & Stefanos A. Zenios, 2000. "Performance-Based Incentives in a Dynamic Principal-Agent Model," Manufacturing & Service Operations Management, INFORMS, vol. 2(3), pages 240-263, April.
    4. Boyan Jovanovic & Yaw Nyarko, 1994. "Learning By Doing and the Choice of Technology," NBER Working Papers 4739, National Bureau of Economic Research, Inc.
    5. Rachamadugu, Ram & Tan, Chong Leng, 1997. "Policies for lot sizing with setup learning," International Journal of Production Economics, Elsevier, vol. 48(2), pages 157-165, January.
    6. Yu, Jun-Wu & Tian, Guo-Liang & Tang, Man-Lai, 2007. "Predictive analyses for nonhomogeneous Poisson processes with power law using Bayesian approach," Computational Statistics & Data Analysis, Elsevier, vol. 51(9), pages 4254-4268, May.
    7. Charles H. Fine, 1986. "Quality Improvement and Learning in Productive Systems," Management Science, INFORMS, vol. 32(10), pages 1301-1315, October.
    8. Chand, Suresh, 1989. "Lot sizes and setup frequency with learning in setups and process quality," European Journal of Operational Research, Elsevier, vol. 42(2), pages 190-202, September.
    9. Wang, Hongzhou, 2002. "A survey of maintenance policies of deteriorating systems," European Journal of Operational Research, Elsevier, vol. 139(3), pages 469-489, June.
    10. Murthy, D. N. P. & Asgharizadeh, E., 1999. "Optimal decision making in a maintenance service operation," European Journal of Operational Research, Elsevier, vol. 116(2), pages 259-273, July.
    11. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
    12. James R. Dorroh & Thomas R. Gulledge & Norman K. Womer, 1994. "Investment in Knowledge: A Generalization of Learning By Experience," Management Science, INFORMS, vol. 40(8), pages 947-958, August.
    13. Joseph B. Mazzola & Kevin F. McCardle, 1996. "A Bayesian Approach to Managing Learning-Curve Uncertainty," Management Science, INFORMS, vol. 42(5), pages 680-692, May.
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    Cited by:
    1. Miguel Cruz, Antonio & Maria Rios Rincon, Adriana, 2012. "Medical device maintenance outsourcing: Have operation management research and management theories forgotten the medical engineering community? A mapping review," European Journal of Operational Research, Elsevier, vol. 221(1), pages 186-197.
    2. Berrade, M.D. & Cavalcante, Cristiano A.V. & Scarf, Philip A., 2012. "Maintenance scheduling of a protection system subject to imperfect inspection and replacement," European Journal of Operational Research, Elsevier, vol. 218(3), pages 716-725.
    3. Cruz, Antonio Miguel & Haugan, Gregory L. & Rincon, Adriana Maria Rios, 2014. "The effects of asset specificity on maintenance financial performance: An empirical application of Transaction Cost Theory to the medical device maintenance field," European Journal of Operational Research, Elsevier, vol. 237(3), pages 1037-1053.

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