Optimal maintenance service strategy for OEM entering competitive MRO market under opposite patterns

Abstract

Increasing demand and high profitability of maintenance services in modern industry have prompted original equipment manufacturers (OEMs) to enter maintenance, repair and overhaul (MRO) markets. However, the intensive competition among incumbent independent maintenance providers (IMPs) increases the difficulty of winning market share. Meanwhile, the supply and demand relationship with IMPs on spare parts make it more complicated to obtain higher profit. Hence, an optimal maintenance service strategy (MSS) is urgently needed for OEMs. In addition, independent operation (non-cooperative pattern) and cooperating with incumbent IMP (cooperative pattern) are two entry patterns. It is necessary for OEMs to figure out the optimal MSS under each pattern and the profitability of these two patterns. Therefore, this paper investigates the MSS optimization issue under cooperative and non-cooperative patterns from the perspective of an OEM entering a competitive MRO market. The maintenance service competition is introduced by defining a customer choice model. Moreover, the interaction between maintenance services and spare parts sales is captured in the profit function. Then, a joint decision on price, preventive maintenance (PM) frequency and PM level is unprecedentedly studied under each pattern to maximize the profit. The findings help OEMs enter an MRO market in the most profitable way.