Learning effects on maintenance outsourcing

• Published in: European journal of operational research Vol. 192; no. 1; pp. 138 - 150
• Main Authors: Tarakci, Hakan, Tang, Kwei, Teyarachakul, Sunantha
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 2009; Elsevier; Elsevier Sequoia S.A
• Series: European Journal of Operational Research
• Subjects: Cost subsidization; Learning; Maintenance contracts; Maintenance outsourcing; Maintenance outsourcing Learning Cost subsidization; Manufacturers; Organizational learning; Outsourcing; Preventive maintenance; Scheduling; Studies; Learning; Maintenance outsourcing; Cost subsidization
• ISSN: 0377-2217; 1872-6860
• DOI: 10.1016/j.ejor.2007.09.016

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.