IDEAS home Printed from https://ideas.repec.org/a/spr/annopr/v231y2015i1p185-20610.1007-s10479-013-1506-1.html
   My bibliography  Save this article

Integrating inventory control and capacity management at a maintenance service provider

Author

Listed:
  • Nasuh Buyukkaramikli
  • Henny Ooijen
  • J. Bertrand

Abstract

In this paper, we study the capacity flexibility problem of a maintenance service provider, who is running a repair shop and is responsible for the availability of numerous specialized systems which contain a critical component that is prone to failure. Upon a critical component failure, the component is sent to the repair shop and the service provider is responsible for the repair as well as the down-time costs resulting from the system unavailability. In order to decrease the down-time costs, the repair shop keeps an inventory for the critical components, such that a failed critical component can be replaced with a spare one immediately, if it is available. The component inventory stock level and the repair shop capacity level decisions have to be taken jointly by the service provider. The shop floor manager resorts to two different capacity modes in order to make use of capacity flexibility. First one is the single-level capacity mode, in which the capacity level is fixed and is the only capacity related decision. The best results in this mode serve as a reference to the two-level capacity mode, in which there are low (permanent) and high (permanent plus contingent) capacity levels. In this mode, the permanent capacity is always available in the shop, whereas the deployment of the contingent capacity is decided at the start of each period based on the number of components waiting to be repaired in the shop. The relevant capacity decisions of this mode are the permanent and contingent capacity levels, the period length and the states (in terms of number of failed components waiting) where the contingent capacity is deployed. We develop quantitative models based on queuing theory that integrate the inventory level decision with the capacity related decisions for the repair shop, in each of the two capacity modes, in order to minimize the total cost rate of the service provider. Our numerical results suggest that two-level capacity mode can bring substantial savings compared to the best fixed capacity mode and these savings are mostly resulting from lower repair shop capacity usage. Moreover, we find that the system, in most cases, chooses the shortest period length possible, indicating the overarching importance of a fast response to the system state. The system switches to the high capacity mode if the spare part stock is just one or two, then it uses a quite high contingent capacity level, in order to avoid out of stock. If contingent capacity costs are high, system chooses a high level of permanent capacity to prevent frequent capacity switches. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Nasuh Buyukkaramikli & Henny Ooijen & J. Bertrand, 2015. "Integrating inventory control and capacity management at a maintenance service provider," Annals of Operations Research, Springer, vol. 231(1), pages 185-206, August.
    • Handle: RePEc:spr:annopr:v:231:y:2015:i:1:p:185-206:10.1007/s10479-013-1506-1
    DOI: 10.1007/s10479-013-1506-1
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10479-013-1506-1
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10479-013-1506-1?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. S. Christian Albright & A. Soni, 1988. "Markovian multiechelon repairable inventory system," Naval Research Logistics (NRL), John Wiley & Sons, vol. 35(1), pages 49-61, February.
    2. Diaz, Angel & Fu, Michael C., 1997. "Models for multi-echelon repairable item inventory systems with limited repair capacity," European Journal of Operational Research, Elsevier, vol. 97(3), pages 480-492, March.
    3. Joseph M. Milner & Edieal J. Pinker, 2001. "Contingent Labor Contracting Under Demand and Supply Uncertainty," Management Science, INFORMS, vol. 47(8), pages 1046-1062, August.
    4. Barış Tan & Stanley Gershwin, 2004. "Production and Subcontracting Strategies for Manufacturers with Limited Capacity and Volatile Demand," Annals of Operations Research, Springer, vol. 125(1), pages 205-232, January.
    5. Zijm, W. Henk & Avsar, Zeynep Muge, 2003. "Capacitated two-indenture models for repairable item systems," International Journal of Production Economics, Elsevier, vol. 81(1), pages 573-588, January.
    6. Gary D. Scudder & Warren H. Hausman, 1982. "Spares stocking policies for repairable items with dependent repair times," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 29(2), pages 303-322, June.
    7. James R. Bradley & Peter W. Glynn, 2002. "Managing Capacity and Inventory Jointly in Manufacturing Systems," Management Science, INFORMS, vol. 48(2), pages 273-288, February.
    8. Michael C. Fu & Steven I. Marcus & I-Jeng Wang, 2000. "Monotone Optimal Policies for a Transient Queueing Staffing Problem," Operations Research, INFORMS, vol. 48(2), pages 327-331, April.
    9. Jan A. Van Mieghem, 1999. "Coordinating Investment, Production, and Subcontracting," Management Science, INFORMS, vol. 45(7), pages 954-971, July.
    10. Nasuh Buyukkaramikli & J. Bertrand & Henny Ooijen, 2013. "Flexible hiring in a make to order system with parallel processing units," Annals of Operations Research, Springer, vol. 209(1), pages 159-178, October.
    11. Pinker, Edieal J. & Larson, Richard C., 2003. "Optimizing the use of contingent labor when demand is uncertain," European Journal of Operational Research, Elsevier, vol. 144(1), pages 39-55, January.
    12. A Sleptchenko & M C van der Heijden & A van Harten, 2003. "Trade-off between inventory and repair capacity in spare part networks," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 54(3), pages 263-272, March.
    13. G. J. Feeney & C. C. Sherbrooke, 1966. "The (S - 1, S) Inventory Policy Under Compound Poisson Demand," Management Science, INFORMS, vol. 12(5), pages 391-411, January.
    14. Y Perlman & A Mehrez & M Kaspi, 2001. "Setting expediting repair policy in a multi-echelon repairable-item inventory system with limited repair capacity," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 52(2), pages 198-209, February.
    15. Nima Safaei & Dragan Banjevic & Andrew Jardine, 2011. "Workforce-constrained maintenance scheduling for military aircraft fleet: a case study," Annals of Operations Research, Springer, vol. 186(1), pages 295-316, June.
    16. S. Christian Albright & Amit Gupta, 1993. "Steady‐state approximation of a multiechelon multi‐indentured repairable‐item inventory system with a single repair facility," Naval Research Logistics (NRL), John Wiley & Sons, vol. 40(4), pages 479-493, June.
    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. Nha-Nghi Cruz & Hans Daduna, 2019. "Optimal capacity allocation in a production–inventory system with base stock," Annals of Operations Research, Springer, vol. 277(2), pages 329-344, June.
    2. Hu, Qiwei & Boylan, John E. & Chen, Huijing & Labib, Ashraf, 2018. "OR in spare parts management: A review," European Journal of Operational Research, Elsevier, vol. 266(2), pages 395-414.
    3. Kevin Granville & Steve Drekic, 2020. "A 2-class maintenance model with dynamic server behavior," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 28(1), pages 34-96, April.
    4. Altendorfer, Klaus, 2017. "Relation between lead time dependent demand and capacity flexibility in a two-stage supply chain with lost sales," International Journal of Production Economics, Elsevier, vol. 194(C), pages 13-24.
    5. Libiao Bai & Kanyin Zheng & Zhiguo Wang & Jiale Liu, 2022. "Service provider portfolio selection for project management using a BP neural network," Annals of Operations Research, Springer, vol. 308(1), pages 41-62, January.
    6. Qin, Xuwei & Jiang, Zhong-Zhong & Sun, Minghe & Tang, Liang & Liu, Xiaoran, 2021. "Repairable spare parts provisioning for multiregional expanding fleets of equipment under performance-based contracting," Omega, Elsevier, vol. 102(C).
    7. van Ooijen, Henny & Bertrand, J. Will M. & Buyukkaramikli, Nasuh C., 2019. "Coordinating failed goods collecting and repair capacity policies in the maintenance of commoditized capital goods," International Journal of Production Economics, Elsevier, vol. 208(C), pages 29-42.

    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. Nasuh Buyukkaramikli & J. Bertrand & Henny Ooijen, 2013. "Flexible hiring in a make to order system with parallel processing units," Annals of Operations Research, Springer, vol. 209(1), pages 159-178, October.
    2. van der Heijden, M.C. & Alvarez, E.M. & Schutten, J.M.J., 2013. "Inventory reduction in spare part networks by selective throughput time reduction," International Journal of Production Economics, Elsevier, vol. 143(2), pages 509-517.
    3. Driessen, M.A. & van Houtum, G.J. & Zijm, W.H.M. & Rustenburg, W.D., 2020. "Capacity assignment in repair shops with high material uncertainty," International Journal of Production Economics, Elsevier, vol. 221(C).
    4. Turan, Hasan Hüseyin & Atmis, Mahir & Kosanoglu, Fuat & Elsawah, Sondoss & Ryan, Michael J., 2020. "A risk-averse simulation-based approach for a joint optimization of workforce capacity, spare part stocks and scheduling priorities in maintenance planning," Reliability Engineering and System Safety, Elsevier, vol. 204(C).
    5. de Smidt-Destombes, Karin S. & van der Heijden, Matthieu C. & van Harten, Aart, 2006. "On the interaction between maintenance, spare part inventories and repair capacity for a k-out-of-N system with wear-out," European Journal of Operational Research, Elsevier, vol. 174(1), pages 182-200, October.
    6. Marty Stuebs & Li Sun, 2010. "Business Reputation and Labor Efficiency, Productivity, and Cost," Journal of Business Ethics, Springer, vol. 96(2), pages 265-283, October.
    7. Rappold, James A. & Van Roo, Ben D., 2009. "Designing multi-echelon service parts networks with finite repair capacity," European Journal of Operational Research, Elsevier, vol. 199(3), pages 781-792, December.
    8. Qin, Xuwei & Shao, Lusheng & Jiang, Zhong-Zhong, 2020. "Contract design for equipment after-sales service with business interruption insurance," European Journal of Operational Research, Elsevier, vol. 284(1), pages 176-187.
    9. Josh Reed & Bo Zhang, 2017. "Managing capacity and inventory jointly for multi-server make-to-stock queues," Queueing Systems: Theory and Applications, Springer, vol. 86(1), pages 61-94, June.
    10. Minjae Park & Ki Mun Jung & Dong Ho Park, 2016. "Optimal warranty policies considering repair service and replacement service under the manufacturer’s perspective," Annals of Operations Research, Springer, vol. 244(1), pages 117-132, September.
    11. Eryn Juan He & Joel Goh, 2022. "Profit or Growth? Dynamic Order Allocation in a Hybrid Workforce," Management Science, INFORMS, vol. 68(8), pages 5891-5906, August.
    12. Jan A. Van Mieghem, 2003. "Commissioned Paper: Capacity Management, Investment, and Hedging: Review and Recent Developments," Manufacturing & Service Operations Management, INFORMS, vol. 5(4), pages 269-302, July.
    13. A Sleptchenko & M C van der Heijden & A van Harten, 2003. "Trade-off between inventory and repair capacity in spare part networks," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 54(3), pages 263-272, March.
    14. Sleptchenko, A. & van der Heijden, M. C. & van Harten, A., 2005. "Using repair priorities to reduce stock investment in spare part networks," European Journal of Operational Research, Elsevier, vol. 163(3), pages 733-750, June.
    15. Techawiboonwong, Atthawit & Yenradee, Pisal & Das, Sanchoy K., 2006. "A master scheduling model with skilled and unskilled temporary workers," International Journal of Production Economics, Elsevier, vol. 103(2), pages 798-809, October.
    16. Hu, Qiwei & Boylan, John E. & Chen, Huijing & Labib, Ashraf, 2018. "OR in spare parts management: A review," European Journal of Operational Research, Elsevier, vol. 266(2), pages 395-414.
    17. Rezapour, Shabnam & Allen, Janet K. & Mistree, Farrokh, 2016. "Reliable product-service supply chains for repairable products," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 95(C), pages 299-321.
    18. Sun, Mingyao & Ng, Chi To & Wu, Feng & Cheng, T.C.E., 2022. "Optimization of after-sales services with spare parts consumption and repairman travel," International Journal of Production Economics, Elsevier, vol. 244(C).
    19. Qin, Xuwei & Jiang, Zhong-Zhong & Sun, Minghe & Tang, Liang & Liu, Xiaoran, 2021. "Repairable spare parts provisioning for multiregional expanding fleets of equipment under performance-based contracting," Omega, Elsevier, vol. 102(C).
    20. Nha-Nghi Cruz & Hans Daduna, 2019. "Optimal capacity allocation in a production–inventory system with base stock," Annals of Operations Research, Springer, vol. 277(2), pages 329-344, June.

    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:spr:annopr:v:231:y:2015:i:1:p:185-206:10.1007/s10479-013-1506-1. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.