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A study of repairable parts inventory system operating under performance-based contract

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  • Mirzahosseinian, H.
  • Piplani, R.

Abstract

Performance-Based Logistics (PBL) is becoming a dominant logistics support strategy, especially in the defense industry. PBL contracts are designed to serve the customer's key performance measures, while the traditional contracts for after-sales services, such as Fixed-price (FP) and Cost-plus (C+), only provide insurance or incentive. In this research, we develop an inventory model for a repairable parts system operating under a PBL contract. We model the closed-loop inventory system as an M/M/m queue in which component failures are Poisson distributed and the repair times at the service facility are exponential. Our model provides the supplier and the customer increased flexibility in achieving target availability. Analysis of key parameters suggests that to improve the availability of the system with repairable spare parts, the supplier should work to improve the components reliability and efficiency of repair facility, rather than the base stock level, which has minimal impact on system availability.

Suggested Citation

  • Mirzahosseinian, H. & Piplani, R., 2011. "A study of repairable parts inventory system operating under performance-based contract," European Journal of Operational Research, Elsevier, vol. 214(2), pages 256-261, October.
    • Handle: RePEc:eee:ejores:v:214:y:2011:i:2:p:256-261
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    Cited by:

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    2. Qin, Xuwei & Shao, Lusheng & Jiang, Zhong-Zhong, 2020. "Contract design for equipment after-sales service with business interruption insurance," European Journal of Operational Research, Elsevier, vol. 284(1), pages 176-187.
    3. Zhang, Shuguang & Dan, Bin & Zhou, Maosen, 2019. "After-sale service deployment and information sharing in a supply chain under demand uncertainty," European Journal of Operational Research, Elsevier, vol. 279(2), pages 351-363.
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    5. Rahimi-Ghahroodi, S. & Al Hanbali, A. & Zijm, W.H.M. & Timmer, J.B., 2019. "Emergency supply contracts for a service provider with limited local resources," Reliability Engineering and System Safety, Elsevier, vol. 189(C), pages 445-460.
    6. Chiu, Yuan-Shyi Peter & Chang, Huei-Hsin, 2014. "Optimal run time for EPQ model with scrap, rework and stochastic breakdowns: A note," Economic Modelling, Elsevier, vol. 37(C), pages 143-148.
    7. Patra, Pradipta & Kumar, U. Dinesh & Nowicki, David R. & Randall, Wesley S., 2019. "Effective management of performance-based contracts for sustainment dominant systems," International Journal of Production Economics, Elsevier, vol. 208(C), pages 369-382.
    8. Hu, Qiwei & Boylan, John E. & Chen, Huijing & Labib, Ashraf, 2018. "OR in spare parts management: A review," European Journal of Operational Research, Elsevier, vol. 266(2), pages 395-414.
    9. Yujie Zhang & Yukun Wang & Xiaopeng Li & Yiliu Liu & Weizheng Gao, 2024. "Condition-based maintenance optimization for deteriorating systems considering performance-based contracting and destructive inspections," Journal of Risk and Reliability, , vol. 238(2), pages 247-259, April.
    10. 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.
    11. Godoy, David R. & Pascual, Rodrigo & Knights, Peter, 2014. "A decision-making framework to integrate maintenance contract conditions with critical spares management," Reliability Engineering and System Safety, Elsevier, vol. 131(C), pages 102-108.
    12. Zhang, Yongjin & Zhao, Ming & Zhang, Shitao & Wang, Jiamei & Zhang, Yanjun, 2017. "An integrated approach to estimate storage reliability with initial failures based on E-Bayesian estimates," Reliability Engineering and System Safety, Elsevier, vol. 159(C), pages 24-36.
    13. Ossai, Chinedu I., 2017. "Optimal renewable energy generation – Approaches for managing ageing assets mechanisms," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 269-280.
    14. Wang, Yulan & Wallace, Stein W. & Shen, Bin & Choi, Tsan-Ming, 2015. "Service supply chain management: A review of operational models," European Journal of Operational Research, Elsevier, vol. 247(3), pages 685-698.
    15. Korkeamäki, Lauri & Kohtamäki, Marko & Parida, Vinit, 2021. "Worth the risk? The profit impact of outcome-based service offerings for manufacturing firms," Journal of Business Research, Elsevier, vol. 131(C), pages 92-102.
    16. Qin, Xuwei & Jiang, Zhong-Zhong & Sun, Minghe & Tang, Liang & Liu, Xiaoran, 2021. "Repairable spare parts provisioning for multiregional expanding fleets of equipment under performance-based contracting," Omega, Elsevier, vol. 102(C).
    17. Kazemi Zanjani, Masoumeh & Nourelfath, Mustapha, 2014. "Integrated spare parts logistics and operations planning for maintenance service providers," International Journal of Production Economics, Elsevier, vol. 158(C), pages 44-53.

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