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Learning effects on maintenance outsourcing

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  • Tarakci, Hakan
  • Tang, Kwei
  • Teyarachakul, Sunantha

Abstract

The objective of this paper is to study learning effects on maintenance outsourcing. We consider a situation in which a manufacturer offers a short-term outsourcing contract to an external contractor who is responsible for scheduling and performing preventive maintenance and carrying out minimal repairs when the process fails. The manufacturer's payment to the contractor consists of a fixed amount along with cost subsidization for each maintenance operation performed. We assume learning occurs when the contractor performs preventive maintenance that reduces both time and cost. Two types of learning are considered: natural learning and learning by costly efforts. We demonstrate that a well-designed payment scheme can induce the contractor to adopt the maintenance schedule that maximizes the manufacturer's profit.

Suggested Citation

  • Tarakci, Hakan & Tang, Kwei & Teyarachakul, Sunantha, 2009. "Learning effects on maintenance outsourcing," European Journal of Operational Research, Elsevier, vol. 192(1), pages 138-150, January.
    • Handle: RePEc:eee:ejores:v:192:y:2009:i:1:p:138-150
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    Cited by:

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    3. Womer, K. & Li, H. & Camm, J. & Osterman, C. & Radhakrishnan, R., 2017. "Learning and Bayesian updating in long cycle made-to-order (MTO) production," Omega, Elsevier, vol. 69(C), pages 29-42.
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    5. Tjader, Youxu Cai & Shang, Jennifer S. & Vargas, Luis G., 2010. "Offshore outsourcing decision making: A policy-maker's perspective," European Journal of Operational Research, Elsevier, vol. 207(1), pages 434-444, November.
    6. Yamane, Yasuo & Takahashi, Katsuhiko & Hamada, Kunihiro & Morikawa, Katsumi & Nur Bahagia, Senator & Diawati, Lucia & Cakravastia, Andi, 2015. "Developing a plant system prediction model for technology transfer," International Journal of Production Economics, Elsevier, vol. 166(C), pages 119-128.
    7. Zhong-Zhong Jiang & Na He & Xuwei Qin & Minghe Sun & Pengfei Wang, 2022. "Optimizing production and maintenance for the service-oriented manufacturing supply chain," Annals of Operations Research, Springer, vol. 316(1), pages 33-58, September.
    8. Wang, Yukun & Liu, Yiliu & Li, Xiaopeng & Chen, Junyan, 2019. "Multi-phase reliability growth test planning for repairable products sold with a two-dimensional warranty," Reliability Engineering and System Safety, Elsevier, vol. 189(C), pages 315-326.
    9. Sharafali, Moosa & Tarakci, Hakan & Kulkarni, Shailesh & Razack Shahul Hameed, Raja Abdul, 2019. "Optimal delivery due date for a supplier with an unreliable machine under outsourced maintenance," International Journal of Production Economics, Elsevier, vol. 208(C), pages 53-68.
    10. Wang, Dongfan & He, Zhen & He, Shuguang & Zhang, Zhaomin & Zhang, Yiwen, 2021. "Dynamic pricing of two-dimensional extended warranty considering the impacts of product price fluctuations and repair learning," Reliability Engineering and System Safety, Elsevier, vol. 210(C).
    11. 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.
    12. Feng Tian & Peng Sun & Izak Duenyas, 2021. "Optimal Contract for Machine Repair and Maintenance," Operations Research, INFORMS, vol. 69(3), pages 916-949, May.
    13. Berrade, M.D. & Cavalcante, Cristiano A.V. & Scarf, Philip A., 2012. "Maintenance scheduling of a protection system subject to imperfect inspection and replacement," European Journal of Operational Research, Elsevier, vol. 218(3), pages 716-725.
    14. Jackson, Canek & Pascual, Rodrigo, 2021. "Joint pricing and maintenance strategies in availability-based product-service systems under different overhaul conditions," Reliability Engineering and System Safety, Elsevier, vol. 216(C).
    15. Lim, Wei Shi & Tan, Soo Jiuan, 2010. "Outsourcing suppliers as downstream competitors: Biting the hand that feeds," European Journal of Operational Research, Elsevier, vol. 203(2), pages 360-369, June.
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