A model for maintenance service contract design, negotiation and optimization

Wang, W

Abstract

A model is presented in this paper for maintenance service contract design, negotiation and optimization.
The model was developed under the assumption that there are one customer and one unique service provider
who is the Original Equipment Manufacturer (OEM) and is called the agent in this paper. This is typically
applied to the situation where the OEM is the only possible service supplier such as in the case of
major military equipment in the defense sector. Three contract options were considered, depending on
the extent of outsourced maintenance activities. From an agent point of view, they are, (1), the agent carries
out all repairs and inspections; (2), the agent carries out failure based repairs, and (3), the agent does
inspections and repairs to the defects identified at inspections. For options two and three, the customer
does the rest of maintenance. The relationship between inspections and failures was modeled using the
delay time concept and a numerical example was illustrated. The cases of perfect information to both parties
and information asymmetry were also discussed in the example. The model developed can be used
for contract design, negotiation and optimization.

Citation

Wang, W. (2009). A model for maintenance service contract design, negotiation and optimization. European Journal of Operational Research, 201, 239-246. https://doi.org/10.1016/j.ejor.2009.02.018

• Journal Article Type: Article
• Publication Date: Jan 1, 2009
• Deposit Date: Nov 24, 2009
• Journal: European Journal of Operational Research
• Print ISSN: 0377-2217
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 201
• Pages: 239-246
• DOI: https://doi.org/10.1016/j.ejor.2009.02.018
• Keywords: Maintenance; Service contract; Repair; Inspection; Reliability; Delay time
• Publisher URL: http://dx.doi.org/10.1016/j.ejor.2009.02.018
• Additional Information: Funders : Engineering and Physical Sciences Research Council (EPSRC)