Optimal preventive maintenance policy for leased equipment for free with minimum quantity of consumables purchasing commitment by the lessee

Abstract

PurposeThis paper deals with a particular type of leasing contracts according to which an equipment is leased for free with the condition for the lessee to purchase a predetermined minimum quantity of consumables during each leasing period. Maintenance actions are performed by the lessor and borne by him. Imperfect preventive maintenance is carried out every t time units throughout the leasing period. Minimal repairs are performed following equipment failures. At the end of the leasing period, an overhaul which restores the equipment to “as good as new” state is performed. The equipment is leased many times during its life cycle. The purpose of this paper is to determine the values of the decision variables for the lessor, which are the preventive maintenance (PM) period and the minimum quantity of consumables to be sold to ensure profit.Design/methodology/approachA mathematical model is developed to express the expected maintenance cost per time unit incurred by the lessor as well as his expected profit over the equipment life cycle. The optimal PM period minimizing the maintenance cost is determined first. Then, given the corresponding minimum maintenance cost, the minimum quantity of consumables (the lessor's break-even point) to be purchased by the lessee is computed. A numerical example and a sensitivity study are presented, and the obtained results are discussed.FindingsThe outcome of this work is supposed to help the lessors determining two key values to be included in each leasing contract, namely: (1) the periodicity according to which they will commit to perform preventive maintenance actions such that their average total cost of maintenance is minimized, (2) the minimum quantity of consumables that the lessee must commit to purchasing during the leasing period. This quantity must be between the break-even point and the maximum quantity associated with the capacity of the equipment.Practical implicationsPractically, the objective of this work is first to determine the optimal strategy to be adopted by the lessor in terms of effort relating to PM and second to determine the minimum quantity of consumables that the lessee must purchase during the leasing period such as profit is insured for the lessor.Originality/valueThis type of leasing (for free) has not been addressed in the literature particularly when considering maintenance strategies.