Joint optimization of performance-based contracting, condition-based maintenance and spare parts inventory for degrading production systems

Yukun Wang, Weizheng Gao, Xiaopeng Li and Yiliu Liu

Reliability Engineering and System Safety, 2024, vol. 243, issue C

Abstract: As a novel supporting approach, performance-based contracting (PBC) ties the service supplier’s compensation to the performance outcome of the system owned by the customer. It enables the service supplier to implement an effective maintenance and spare parts inventory policy so as to improve system performance. In this paper, we propose a principal–agent modeling framework for deteriorating production systems operating under PBC, with the objective of maximizing the expected utilities of both stakeholders. The customer (principal) offers PBC with a fixed payment plus performance incentive form to the service supplier (agent), who in turn implements a condition-based maintenance (CBM) policy based on the system prognostic condition at periodic inspections, and sets an investment level of spare parts inventory. Considering the partial observability of the service supplier’s actions, the optimal combination of performance incentive in PBC provided by the customer, and the joint CBM and spare parts inventory policy implemented by the service supplier, are determined through a two-stage and heuristic approach. Finally, a numerical example and sensitivity analysis based on a real-world scenario are presented to illustrate and verify the applicability of the proposed model.

Keywords: Performance-based contracting; Condition-based maintenance; Spare parts inventory; Joint optimization; Production systems (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reensy:v:243:y:2024:i:c:s0951832023007597

DOI: 10.1016/j.ress.2023.109845

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