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Optimizing reliability and service parts logistics for a time-varying installed base

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  • Jin, Tongdan
  • Tian, Yu

Abstract

Performance based contracting (PBC) emerges as a new after-sales service practice to support the operation and maintenance of capital equipment or systems. Under the PBC framework, the goal of the study is to increase the system operational availability while minimizing the logistics footprint through the design for reliability. We consider the situation where the number of installed systems randomly increases over the planning horizon, resulting in a non-stationary maintenance and repair demand. Renewal equation and Poisson process are used to estimate the aggregate fleet failures. We propose a dynamic stocking policy that adaptively replenishes the inventory to meet the time-varying parts demand. An optimization model is formulated and solved under a multi-phase adaptive inventory control policy. The study provides theoretical insights into the performance-driven service operation in the context of changing system fleet size due to new installations. Trade-offs between reliability design and inventory level are examined and compared in various shipment scenarios. Numerical examples drawn from semiconductor equipment industry are used to demonstrate the applicability and the performance of the proposed method.

Suggested Citation

  • Jin, Tongdan & Tian, Yu, 2012. "Optimizing reliability and service parts logistics for a time-varying installed base," European Journal of Operational Research, Elsevier, vol. 218(1), pages 152-162.
    • Handle: RePEc:eee:ejores:v:218:y:2012:i:1:p:152-162
    DOI: 10.1016/j.ejor.2011.10.026
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    Cited by:

    1. Jin, Tongdan & Tian, Zhigang & Xie, Min, 2015. "A game-theoretical approach for optimizing maintenance, spares and service capacity in performance contracting," International Journal of Production Economics, Elsevier, vol. 161(C), pages 31-43.
    2. Xie, Wei & Liao, Haitao & Jin, Tongdan, 2014. "Maximizing system availability through joint decision on component redundancy and spares inventory," European Journal of Operational Research, Elsevier, vol. 237(1), pages 164-176.
    3. 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.
    4. 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.
    5. Shuai Zhang & Kai Huang & Yufei Yuan, 2021. "Spare Parts Inventory Management: A Literature Review," Sustainability, MDPI, vol. 13(5), pages 1-23, February.
    6. Hekimoğlu, Mustafa & Karlı, Deniz, 2023. "Modeling repair demand in existence of a nonstationary installed base," International Journal of Production Economics, Elsevier, vol. 263(C).
    7. 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.
    8. Van der Auweraer, Sarah & Zhu, Sha & Boute, Robert N., 2021. "The value of installed base information for spare part inventory control," International Journal of Production Economics, Elsevier, vol. 239(C).
    9. Qianru Ge & Willem van Jaarsveld & Zümbül Atan, 2020. "Optimal redesign decisions through failure rate estimates," Naval Research Logistics (NRL), John Wiley & Sons, vol. 67(4), pages 254-271, June.
    10. Minjae Park & Ki Mun Jung & Dong Ho Park, 2016. "Optimal warranty policies considering repair service and replacement service under the manufacturer’s perspective," Annals of Operations Research, Springer, vol. 244(1), pages 117-132, September.
    11. 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.
    12. Van der Auweraer, Sarah & Boute, Robert N. & Syntetos, Aris A., 2019. "Forecasting spare part demand with installed base information: A review," International Journal of Forecasting, Elsevier, vol. 35(1), pages 181-196.
    13. Ge, Qianru & Peng, Hao & van Houtum, Geert-Jan & Adan, Ivo, 2018. "Reliability optimization for series systems under uncertain component failure rates in the design phase," International Journal of Production Economics, Elsevier, vol. 196(C), pages 163-175.
    14. 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.
    15. Rohit Kapoor & Bhavin J. Shah, 2016. "Simulation model for closed loop repairable parts inventory system with service level performance measures," International Journal of Services and Operations Management, Inderscience Enterprises Ltd, vol. 23(1), pages 18-42.
    16. Huber, Sebastian & Spinler, Stefan, 2012. "Pricing of full-service repair contracts," European Journal of Operational Research, Elsevier, vol. 222(1), pages 113-121.
    17. Bei, Xiaoqiang & Zhu, Xiaoyan & Coit, David W., 2019. "A risk-averse stochastic program for integrated system design and preventive maintenance planning," European Journal of Operational Research, Elsevier, vol. 276(2), pages 536-548.
    18. 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.
    19. Westerweel, Bram & Basten, Rob J.I. & van Houtum, Geert-Jan, 2018. "Traditional or Additive Manufacturing? Assessing Component Design Options through Lifecycle Cost Analysis," European Journal of Operational Research, Elsevier, vol. 270(2), pages 570-585.
    20. Kim, T.Y. & Dekker, R. & Heij, C., 2016. "Spare part demand forecasting for consumer goods using installed base information," Econometric Institute Research Papers EI2016-11, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    21. 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.
    22. 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).

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