IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v273y2019i2p561-574.html
   My bibliography  Save this article

Replacement and inventory control for a multi-customer product service system with decreasing replacement costs

Author

Listed:
  • Liu, Xinbao
  • Yang, Tianji
  • Pei, Jun
  • Liao, Haitao
  • Pohl, Edward A.

Abstract

In a Use-Oriented Product Service System, the customers pay for a particular service without owning the product, and the profitability of the service provider (usually also the owner of the product) is determined by the product availability and how replacement and inventory control are implemented. With the advances in modern sensor and wireless communication technologies, service providers can monitor the health status of each product in use and then conduct condition-based maintenance accordingly. Meanwhile, the waste of the remaining life of replaced products should also be considered in the system's operation due to the increasing concerns about environmental impact and lean production. To improve the profitability of a Use-Oriented Product Service System, we formulate a discrete-time Markov Decision Process that maximizes the long-term revenue per period. To overcome the computational challenge of this problem, we propose a sequential heuristic solution incorporating a heuristic replacement policy along with a heuristic inventory control approach to solve the integrated model. The heuristic replacement policy is derived from the optimal control policy for the subsystem of a single customer. The inventory control heuristic determines the target inventory level according to a one-period look-ahead myopic optimization policy. The performance of the proposed solution and some useful management insights are investigated in a numerical study. In addition, sensitivity analyses by varying the replacement costs, holding cost, unit service revenue and deterioration rates are also conducted.

Suggested Citation

  • Liu, Xinbao & Yang, Tianji & Pei, Jun & Liao, Haitao & Pohl, Edward A., 2019. "Replacement and inventory control for a multi-customer product service system with decreasing replacement costs," European Journal of Operational Research, Elsevier, vol. 273(2), pages 561-574.
    • Handle: RePEc:eee:ejores:v:273:y:2019:i:2:p:561-574
    DOI: 10.1016/j.ejor.2018.08.029
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221718307240
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2018.08.029?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zhaoqiang Wang & Changhua Hu & Wenbin Wang & Xiangyu Kong & Wei Zhang, 2015. "A prognostics-based spare part ordering and system replacement policy for a deteriorating system subjected to a random lead time," International Journal of Production Research, Taylor & Francis Journals, vol. 53(15), pages 4511-4527, August.
    2. Alaswad, Suzan & Xiang, Yisha, 2017. "A review on condition-based maintenance optimization models for stochastically deteriorating system," Reliability Engineering and System Safety, Elsevier, vol. 157(C), pages 54-63.
    3. Verbert, K. & De Schutter, B. & Babuška, R., 2017. "Timely condition-based maintenance planning for multi-component systems," Reliability Engineering and System Safety, Elsevier, vol. 159(C), pages 310-321.
    4. Nguyen, Kim-Anh & Do, Phuc & Grall, Antoine, 2017. "Joint predictive maintenance and inventory strategy for multi-component systems using Birnbaum’s structural importance," Reliability Engineering and System Safety, Elsevier, vol. 168(C), pages 249-261.
    5. Rommert Dekker & Ralph Wildeman & Frank Duyn Schouten, 1997. "A review of multi-component maintenance models with economic dependence," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 45(3), pages 411-435, October.
    6. Olde Keizer, Minou C.A. & Teunter, Ruud H. & Veldman, Jasper, 2017. "Joint condition-based maintenance and inventory optimization for systems with multiple components," European Journal of Operational Research, Elsevier, vol. 257(1), pages 209-222.
    7. Warren B. Powell, 2016. "Perspectives of approximate dynamic programming," Annals of Operations Research, Springer, vol. 241(1), pages 319-356, June.
    8. Qiu, Ruozhen & Sun, Minghe & Lim, Yun Fong, 2017. "Optimizing (s, S) policies for multi-period inventory models with demand distribution uncertainty: Robust dynamic programing approaches," European Journal of Operational Research, Elsevier, vol. 261(3), pages 880-892.
    9. Zhang, Xiaohong & Zeng, Jianchao, 2017. "Joint optimization of condition-based opportunistic maintenance and spare parts provisioning policy in multiunit systems," European Journal of Operational Research, Elsevier, vol. 262(2), pages 479-498.
    10. Van Horenbeek, Adriaan & Buré, Jasmine & Cattrysse, Dirk & Pintelon, Liliane & Vansteenwegen, Pieter, 2013. "Joint maintenance and inventory optimization systems: A review," International Journal of Production Economics, Elsevier, vol. 143(2), pages 499-508.
    11. Shafiee, Mahmood & Finkelstein, Maxim & Bérenguer, Christophe, 2015. "An opportunistic condition-based maintenance policy for offshore wind turbine blades subjected to degradation and environmental shocks," Reliability Engineering and System Safety, Elsevier, vol. 142(C), pages 463-471.
    12. Kennedy, W. J. & Wayne Patterson, J. & Fredendall, Lawrence D., 2002. "An overview of recent literature on spare parts inventories," International Journal of Production Economics, Elsevier, vol. 76(2), pages 201-215, March.
    13. Zeynep Icten & Steven Shechter & Lisa Maillart & Mahesh Nagarajan, 2013. "Optimal management of a limited number of replacements under Markovian deterioration," IISE Transactions, Taylor & Francis Journals, vol. 45(2), pages 206-214.
    14. Wang, Ling & Chu, Jian & Mao, Weijie, 2009. "A condition-based replacement and spare provisioning policy for deteriorating systems with uncertain deterioration to failure," European Journal of Operational Research, Elsevier, vol. 194(1), pages 184-205, April.
    15. Hong, H.P. & Zhou, W. & Zhang, S. & Ye, W., 2014. "Optimal condition-based maintenance decisions for systems with dependent stochastic degradation of components," Reliability Engineering and System Safety, Elsevier, vol. 121(C), pages 276-288.
    16. Olde Keizer, Minou C.A. & Flapper, Simme Douwe P. & Teunter, Ruud H., 2017. "Condition-based maintenance policies for systems with multiple dependent components: A review," European Journal of Operational Research, Elsevier, vol. 261(2), pages 405-420.
    17. Cho, Danny I. & Parlar, Mahmut, 1991. "A survey of maintenance models for multi-unit systems," European Journal of Operational Research, Elsevier, vol. 51(1), pages 1-23, March.
    18. Tian, Zhigang & Liao, Haitao, 2011. "Condition based maintenance optimization for multi-component systems using proportional hazards model," Reliability Engineering and System Safety, Elsevier, vol. 96(5), pages 581-589.
    19. Joo, Shinhye & Oh, Cheol, 2013. "A novel method to monitor bicycling environments," Transportation Research Part A: Policy and Practice, Elsevier, vol. 54(C), pages 1-13.
    20. Olde Keizer, Minou C.A. & Teunter, Ruud H. & Veldman, Jasper, 2016. "Clustering condition-based maintenance for systems with redundancy and economic dependencies," European Journal of Operational Research, Elsevier, vol. 251(2), pages 531-540.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Levitin, Gregory & Finkelstein, Maxim & Dai, Yuanshun, 2021. "Optimization of cyclic preventive replacement in homogeneous warm-standby system with reusable elements exposed to shocks," Reliability Engineering and System Safety, Elsevier, vol. 207(C).
    2. Delia Montoro-Cazorla & Rafael Pérez-Ocón, 2022. "Optimizing Costs in a Reliability System under Markovian Arrival of Failures and Reposition by K -Policy Inspection," Mathematics, MDPI, vol. 10(11), pages 1-21, June.
    3. Eloiza Kohlbeck & Fernanda Hänsch Beuren & Alexandre Borges Fagundes & Delcio Pereira & Debora Barni de Campos, 2023. "Application of a Generic Model for the Transition to a Product Classified as a Product-Service System: Bike Sharing Case," Sustainability, MDPI, vol. 15(7), pages 1-19, March.
    4. Qi, Faqun & Huang, Meiqi, 2024. "Joint optimization of maintenance and spares inventory policy for a series-parallel system considering dependent failure processes," Reliability Engineering and System Safety, Elsevier, vol. 247(C).
    5. Zhang, Yilun & Liu, Sicheng & Jiang, Zhibin & Xing, Xinjie & Wang, Jiguang, 2024. "Joint optimization of product service system configuration and delivery with learning-based valid cut selection and a tailored heuristic," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 187(C).
    6. Yu, Shiqiang & Guo, Chunxiang, 2024. "Service design under asymmetric service provider competition: Applications of AI services," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 182(C).
    7. Barlow, E. & Bedford, T. & Revie, M. & Tan, J. & Walls, L., 2021. "A performance-centred approach to optimising maintenance of complex systems," European Journal of Operational Research, Elsevier, vol. 292(2), pages 579-595.
    8. Zheng, Meimei & Lin, Jie & Xia, Tangbin & Liu, Yu & Pan, Ershun, 2023. "Joint condition-based maintenance and spare provisioning policy for a K-out-of-N system with failures during inspection intervals," European Journal of Operational Research, Elsevier, vol. 308(3), pages 1220-1232.
    9. Xia, Yu & Tan, Dan & Wang, Bolin, 2021. "Use of a product service system in a competing remanufacturing market," Omega, Elsevier, vol. 102(C).
    10. Levitin, Gregory & Finkelstein, Maxim & Dai, Yuanshun, 2020. "Optimal preventive replacement policy for homogeneous cold standby systems with reusable elements," Reliability Engineering and System Safety, Elsevier, vol. 204(C).
    11. Zheng, Meimei & Su, Zhiyun & Wang, Dong & Pan, Ershun, 2024. "Joint maintenance and spare part ordering from multiple suppliers for multicomponent systems using a deep reinforcement learning algorithm," Reliability Engineering and System Safety, Elsevier, vol. 241(C).
    12. Zheng, Meimei & Ye, Hongqing & Wang, Dong & Pan, Ershun, 2021. "Joint Optimization of Condition-Based Maintenance and Spare Parts Orders for Multi-Unit Systems with Dual Sourcing," Reliability Engineering and System Safety, Elsevier, vol. 210(C).
    13. Levitin, Gregory & Finkelstein, Maxim & Dai, Yuanshun, 2021. "Optimal shock-driven switching strategies with elements reuse in heterogeneous warm-standby systems," Reliability Engineering and System Safety, Elsevier, vol. 210(C).
    14. Basten, Rob J.I. & Ryan, Jennifer K., 2019. "The value of maintenance delay flexibility for improved spare parts inventory management," European Journal of Operational Research, Elsevier, vol. 278(2), pages 646-657.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. de Jonge, Bram & Scarf, Philip A., 2020. "A review on maintenance optimization," European Journal of Operational Research, Elsevier, vol. 285(3), pages 805-824.
    2. Zhang, Xiaohong & Zeng, Jianchao, 2017. "Joint optimization of condition-based opportunistic maintenance and spare parts provisioning policy in multiunit systems," European Journal of Operational Research, Elsevier, vol. 262(2), pages 479-498.
    3. Olde Keizer, Minou C.A. & Flapper, Simme Douwe P. & Teunter, Ruud H., 2017. "Condition-based maintenance policies for systems with multiple dependent components: A review," European Journal of Operational Research, Elsevier, vol. 261(2), pages 405-420.
    4. KarabaÄŸ, Oktay & Eruguz, Ayse Sena & Basten, Rob, 2020. "Integrated optimization of maintenance interventions and spare part selection for a partially observable multi-component system," Reliability Engineering and System Safety, Elsevier, vol. 200(C).
    5. Olde Keizer, Minou C.A. & Teunter, Ruud H. & Veldman, Jasper, 2017. "Joint condition-based maintenance and inventory optimization for systems with multiple components," European Journal of Operational Research, Elsevier, vol. 257(1), pages 209-222.
    6. Wang, Jingjing & Qiu, Qingan & Wang, Huanhuan, 2021. "Joint optimization of condition-based and age-based replacement policy and inventory policy for a two-unit series system," Reliability Engineering and System Safety, Elsevier, vol. 205(C).
    7. Zheng, Meimei & Ye, Hongqing & Wang, Dong & Pan, Ershun, 2021. "Joint Optimization of Condition-Based Maintenance and Spare Parts Orders for Multi-Unit Systems with Dual Sourcing," Reliability Engineering and System Safety, Elsevier, vol. 210(C).
    8. Zhang, Wenyu & Zhang, Xiaohong & He, Shuguang & Zhao, Xing & He, Zhen, 2024. "Optimal condition-based maintenance policy for multi-component repairable systems with economic dependence in a finite-horizon," Reliability Engineering and System Safety, Elsevier, vol. 241(C).
    9. Petchrompo, Sanyapong & Parlikad, Ajith Kumar, 2019. "A review of asset management literature on multi-asset systems," Reliability Engineering and System Safety, Elsevier, vol. 181(C), pages 181-201.
    10. de Jonge, Bram, 2019. "Discretizing continuous-time continuous-state deterioration processes, with an application to condition-based maintenance optimization," Reliability Engineering and System Safety, Elsevier, vol. 188(C), pages 1-5.
    11. Zheng, Meimei & Lin, Jie & Xia, Tangbin & Liu, Yu & Pan, Ershun, 2023. "Joint condition-based maintenance and spare provisioning policy for a K-out-of-N system with failures during inspection intervals," European Journal of Operational Research, Elsevier, vol. 308(3), pages 1220-1232.
    12. Wang, Yukun & Li, Xiaopeng & Chen, Junyan & Liu, Yiliu, 2022. "A condition-based maintenance policy for multi-component systems subject to stochastic and economic dependencies," Reliability Engineering and System Safety, Elsevier, vol. 219(C).
    13. Alaswad, Suzan & Xiang, Yisha, 2017. "A review on condition-based maintenance optimization models for stochastically deteriorating system," Reliability Engineering and System Safety, Elsevier, vol. 157(C), pages 54-63.
    14. Liu, Bin & Pandey, Mahesh D. & Wang, Xiaolin & Zhao, Xiujie, 2021. "A finite-horizon condition-based maintenance policy for a two-unit system with dependent degradation processes," European Journal of Operational Research, Elsevier, vol. 295(2), pages 705-717.
    15. Shahraki, Ameneh Forouzandeh & Yadav, Om Prakash & Vogiatzis, Chrysafis, 2020. "Selective maintenance optimization for multi-state systems considering stochastically dependent components and stochastic imperfect maintenance actions," Reliability Engineering and System Safety, Elsevier, vol. 196(C).
    16. Shi, Yue & Zhu, Weihang & Xiang, Yisha & Feng, Qianmei, 2020. "Condition-based maintenance optimization for multi-component systems subject to a system reliability requirement," Reliability Engineering and System Safety, Elsevier, vol. 202(C).
    17. Salari, Nooshin & Makis, Viliam, 2017. "Comparison of two maintenance policies for a multi-unit system considering production and demand rates," International Journal of Production Economics, Elsevier, vol. 193(C), pages 381-391.
    18. Lin, X. & Basten, R.J.I. & Kranenburg, A.A. & van Houtum, G.J., 2017. "Condition based spare parts supply," Reliability Engineering and System Safety, Elsevier, vol. 168(C), pages 240-248.
    19. Huynh, K.T. & Vu, H.C. & Nguyen, T.D. & Ho, A.C., 2022. "A predictive maintenance model for k-out-of-n:F continuously deteriorating systems subject to stochastic and economic dependencies," Reliability Engineering and System Safety, Elsevier, vol. 226(C).
    20. Zhang, Xiaohong & Liao, Haitao & Zeng, Jianchao & Shi, Guannan & Zhao, Bing, 2021. "Optimal Condition-based Opportunistic Maintenance and Spare Parts Provisioning for a Two-unit System using a State Space Partitioning Approach," Reliability Engineering and System Safety, Elsevier, vol. 209(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:273:y:2019:i:2:p:561-574. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.