Optimal maintenance policy design considering learning effects under successive performance-based contracts

Abstract

Successive short-term performance-based contracts (PBCs) would not only drive the original equipment manufacturer (OEM) to improve maintenance service quality, but also decrease the financial burdens of the equipment owner. This paper presents the optimal maintenance policy incorporating both preventive maintenance (PM) and upgrade actions for continuously monitored degrading equipment under successive short-term PBCs. The improvement factor model is adopted to characterize the impact of the PM and upgrade actions. We also consider that the OEM’s learning effects will affect the cost and duration of the PM, as well as the upgrade cost. The learning effect increases as the period of the contract accumulates. To characterize the varied equipment production and degradation rates across different PBC periods, a Wiener process with covariates is developed. Meanwhile, we assume that the reward and penalty parameters of the performance-based revenue function varied each contract period, thus motivating the OEM to enhance the equipment availability. Based on that, the optimal maintenance plan for each contract period is determined to maximize the OEM’s expected net profit. Numerical examples show the superiority and examine the sensitivity of the proposed successive short-term PBCs. Managerial insights are also given to guide the implementation of the proposed maintenance policy.