On the upgrading policy after the redesign of a component for reliability improvement

Öner, KB Kurtulus; Kiesmüller, Gudrun P.; Houtum, van Geert-Jan Geert-Jan

doi:10.1016/j.ejor.2015.02.007

Cited by 15 publications

(1 citation statement)

References 19 publications

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“…System redesign is a common approach which involves a team of engineers reviewing and analyzing failure data in order to identify the various mechanisms that induce failure. Subsequently, the team investigates system design alterations that may prevent some of these failure‐inducing mechanisms from occurring, and some of these alterations are subsequently implemented to arrive at the next generation system (Mercier, 2008; Mercier & Labeau, 2004; Öner, Kiesmüller, & van Houtum, 2015). The decision on how much to invest in such costly redesign processes is complicated.…”

Section: Introductionmentioning

confidence: 99%

Optimal redesign decisions through failure rate estimates

Jaarsveld

Atan

2020

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To reduce the time-to-market of newly developed systems, manufacturers increasingly adopt strategies where systems are brought to market while system field reliability is still uncertain. These systems are typically sold under performance-based contracts, which incentivizes potential customers to invest in them despite reliability uncertainty. Such contracts make the manufacturer (partly) responsible for the availability of the system. Subsequently, when field reliability is lower than anticipated, the manufacturer may choose to redesign the system to avoid high contract penalties. Redesign is a costly effort which may substantially increase field reliability. Deciding when to redesign is challenging, especially because the initial failure rate estimate by the system's engineers is refined over time as failure data accrues. We propose a model that endogenizes the failure rate updating to analyze this tactical redesign decision. We study additive and multiplicative redesigns and show that the optimal policy has a control limit structure. We benchmark our optimal policy against a static counterpart numerically, and conclude that basing redesign decisions on the updated estimate of the failure rate can substantially reduce costs. KEYWORDS failure rate, performance-based contract, redesign 1 254This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.

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Section: Introductionmentioning

confidence: 99%