Condition-Based Production Planning: Adjusting Production Rates to Balance Output and Failure Risk

Michiel A. J. uit het Broek (), Ruud H. Teunter (), Bram de Jonge (), Jasper Veldman () and Nicky D. Van Foreest ()
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Michiel A. J. uit het Broek: Department of Operations, University of Groningen, 9712 CP Groningen, Netherlands
Ruud H. Teunter: Department of Operations, University of Groningen, 9712 CP Groningen, Netherlands
Bram de Jonge: Department of Operations, University of Groningen, 9712 CP Groningen, Netherlands
Jasper Veldman: Department of Operations, University of Groningen, 9712 CP Groningen, Netherlands
Nicky D. Van Foreest: Department of Operations, University of Groningen, 9712 CP Groningen, Netherlands

Manufacturing & Service Operations Management, 2020, vol. 22, issue 4, 792-811

Abstract: Problem Definition : Many production systems deteriorate over time as a result of load and stress caused by production. The deterioration rate of these systems typically depends on the production rate, implying that the equipment’s deterioration rate can be controlled by adjusting the production rate. We introduce the use of condition monitoring to dynamically adjust the production rate to minimize maintenance costs and maximize production revenues. We study a single-unit system for which the next maintenance action is scheduled upfront. Academic/Practical Relevance : Condition-based maintenance decisions are frequently seen in the literature. However, in many real-life systems, maintenance planning has limited flexibility and cannot be done last minute. As an alternative, we are the first to propose using condition information to optimize the production rate, which is a more flexible short-term decision. Methodology : We derive structural optimality results from the analysis of deterministic deterioration processes. A Markov decision process formulation of the problem is used to obtain numerical results for stochastic deterioration processes. Results : The structure of the optimal policy strongly depends on the (convex or concave) relation between the production rate and the corresponding deterioration rate. Condition-based production rate decisions result in significant cost savings (by up to 50%), achieved by better balancing the failure risk and production output. For several systems a win-win scenario is observed, with both reduced failure risk and increased expected total production. Furthermore, condition-based production rates increase robustness and lead to more stable profits and production output. Managerial Implications : Using condition information to dynamically adjust production rates provides opportunities to improve the operational performance of systems with production-dependent deterioration.

Keywords: optimal production control; condition monitoring; adjustable production rate; reliability; maintenance; operational decision making; productivity (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (17)

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