Maintenance outsourcing coordination with risk-averse contractors

Tseng, Fu Shiang; Yeh, Yingchieh

doi:10.1057/jors.2013.143

Cited by 12 publications

(5 citation statements)

References 24 publications

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“…Within a deterministic framework, Tarakci et al (2006a) and Tarakci et al (2006b) analyze several mechanisms, including a pricing scheme for maintenance contracts, to ensure that the optimal intervals for preventive maintenance from the perspectives of both service provider and equipment owner coincide. Tseng and Yeh (2013) extend the single processor case discussed in Tarakci et al (2006a) for riskaverse customers.…”

Section: Literature Reviewmentioning

confidence: 95%

Optimal design of uptime-guarantee contracts under IGFR valuations and convex costs

Hezarkhani

2017

European Journal of Operational Research

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An uptime-guarantee contract commits a service provider to maintain the functionality of a customer's equipment at least for certain fraction of working time during a contracted period. This paper addresses the optimal design of uptime-guarantee contracts for the service provider when the customer's valuation of a contract with a given guaranteed uptime level has an Increasing Generalized Failure Rate (IGFR) distribution. We first consider the case where the service provider proposes only one contract and characterize the optimal contract in terms of price as well as guaranteed uptime level assuming that the service provider's cost function is convex. In the second part, the case where the service provider offers a menu of contracts is considered. Given the guaranteed uptime levels of different contracts in the menu, we calculate the corresponding optimal prices. We also give the necessary and sufficient conditions for the existence of optimal contract menus with positive expected profits.

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Section: Literature Reviewmentioning

confidence: 95%

Optimal design of uptime-guarantee contracts under IGFR valuations and convex costs

Hezarkhani

2017

European Journal of Operational Research

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“…(2006a, 2006b) analyze several mechanisms, including a pricing scheme for maintenance contracts, to ensure that the optimal intervals for preventive maintenance from the perspectives of both service provider and equipment owner coincide. Tseng and Yeh (2013) extend the single processor case discussed in Tarakci et al. (2006a) for risk‐averse operators.…”

Section: Literature Reviewmentioning

confidence: 96%

“…Within a deterministic framework, Tarakci et al (2006aTarakci et al ( , 2006b analyze several mechanisms, including a pricing scheme for maintenance contracts, to ensure that the optimal intervals for preventive maintenance from the perspectives of both service provider and equipment owner coincide. Tseng and Yeh (2013) extend the single processor case discussed in Tarakci et al (2006a) for risk-averse operators. Some authors draw upon demand elasticity to study the effects of different contracts on a service provider's profit.…”

Section: Production and Operations Managementmentioning

confidence: 96%

Toward servitization: Optimal design of uptime‐guarantee maintenance contracts

Hezarkhani

Nagarajan

Tong

2022

Production and Operations Management

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This paper analyzes the contracting of maintenance services provided by an original equipment manufacturer (OEM) to an operator for a device. The service provider can exert different levels of maintenance effort during the course of the contract and the device's reliability (uptime) is influenced by these levels. However, the service provider's effort level is noncontractible. Our research seeks to find the optimal structures, as well as parameters, of performance‐based maintenance contracts. We single out a unique uptime‐guarantee contract structure that contains profit‐maximizing contracts in many situations. Complete servitization is the essence of such optimal contract structures. With this contract structure, the service provider simply guarantees 100% uptime and compensates the operator's for any occurred downtime at a higher unit rate than it charges for maintenance services. Our findings show that some of the well‐known performance‐based contract structures used in practice (e.g., pay‐for‐performance contracts) can be suboptimal for the OEMs. We incorporate the customer's ability to affect the uptime and show that the optimal contract structures can also coordinate the customer's effort. We demonstrate the advantages and limitations of offering menus of contracts to increase the service provider's expected profits. Finally, through simulations using a sample data set, we find that a contract designed using the key ideas in our paper shows very promising results for practitioners.

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“…As different services are now provided by external parties, the actual processes need to be changed and coordination efforts will increase. It is expected that the cost-saving (or other benefits) compensates for the increase in coordination costs [95][96][97]. Process innovation means changes in existing practices and the consequences of those enhancements lead to outsourcing certain activities.…”

Section: Plos Onementioning

confidence: 99%

Strategy and additive technologies as the catalyst for outsourcing, process innovation and operational effectiveness

Tegethoff

Santa²,

Cayón³

et al. 2023

PLoS ONE

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Purpose There is rising interest in Industry 4.0 as a factor in the competitiveness of the organization. Although many companies are aware of the importance of Industry 4.0, the development of such initiatives in Colombia is slow. Consequently, this research investigates the impact of additive technologies as part of the Industry 4.0 concept on operational effectiveness and, therefore, the competitiveness of the organization and tries to establish the factors that hinder the adequate implementation of such new, innovative technologies. Design/Methodology/Approach Structural equation modeling was used to analyze the antecedents and outcomes of operational effectiveness. To this end, 946 usable questionnaires were collected from managers and personnel from Colombian organizations. Findings Initial findings show that management is aware of Industry 4.0 concepts and implements strategies for such initiatives. Nevertheless, neither process innovation nor additive technologies have a significant impact on operational effectiveness and therefore on the competitiveness of the organization. Practical implications The implementation of new innovative technologies requires the closure of the digital gap between urban and rural areas and between large and medium and small enterprises. Similarly, the concept of Industry 4.0 as a new, innovative manufacturing concept requires a transversal implementation to increase the competitiveness of the organization. Originality/Value The value of this paper lies in discussing the current technological and human capabilities and strategies that Colombian organizations, as an example of a developing nation, should improve to leverage the benefits of Industry 4.0 to remain competitive. The results are probably generalizable to other regions in developing countries throughout the world.

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Maintenance outsourcing coordination with risk-averse contractors

Cited by 12 publications

References 24 publications

Optimal design of uptime-guarantee contracts under IGFR valuations and convex costs

Optimal design of uptime-guarantee contracts under IGFR valuations and convex costs

Toward servitization: Optimal design of uptime‐guarantee maintenance contracts

Strategy and additive technologies as the catalyst for outsourcing, process innovation and operational effectiveness

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