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Learning effects on maintenance outsourcing

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

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.

Suggested Citation

  • Tarakci, Hakan & Tang, Kwei & Teyarachakul, Sunantha, 2009. "Learning effects on maintenance outsourcing," European Journal of Operational Research, Elsevier, vol. 192(1), pages 138-150, January.
  • Handle: RePEc:eee:ejores:v:192:y:2009:i:1:p:138-150
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Gunasekaran, Angappa & Irani, Zahir & Choy, King-Lun & Filippi, Lionel & Papadopoulos, Thanos, 2015. "Performance measures and metrics in outsourcing decisions: A review for research and applications," International Journal of Production Economics, Elsevier, vol. 161(C), pages 153-166.
    2. Womer, K. & Li, H. & Camm, J. & Osterman, C. & Radhakrishnan, R., 2017. "Learning and Bayesian updating in long cycle made-to-order (MTO) production," Omega, Elsevier, vol. 69(C), pages 29-42.
    3. Tjader, Youxu Cai & Shang, Jennifer S. & Vargas, Luis G., 2010. "Offshore outsourcing decision making: A policy-maker's perspective," European Journal of Operational Research, Elsevier, vol. 207(1), pages 434-444, November.
    4. Yamane, Yasuo & Takahashi, Katsuhiko & Hamada, Kunihiro & Morikawa, Katsumi & Nur Bahagia, Senator & Diawati, Lucia & Cakravastia, Andi, 2015. "Developing a plant system prediction model for technology transfer," International Journal of Production Economics, Elsevier, vol. 166(C), pages 119-128.
    5. 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.
    6. 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.
    7. Lim, Wei Shi & Tan, Soo Jiuan, 2010. "Outsourcing suppliers as downstream competitors: Biting the hand that feeds," European Journal of Operational Research, Elsevier, vol. 203(2), pages 360-369, June.
    8. 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.

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