Valuation of performance-based contracts for capital equipment: A stochastic programming approach

Sharifi, Mohammadreza; Kwon, Roy H.; Jardine, Andrew

doi:10.1080/0013791x.2015.1081711

Cited by 11 publications

(6 citation statements)

References 15 publications

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“…This has required an increased focus on customer satisfaction throughout the suppliers' organizations, as there are more points of contact between supplier and customer than ever before (Guo & Ng, 2011). Additionally, tooling MRO contracts are more complex and go beyond fixed-price purchasing (Sharifi, Kwon, & Jardine, 2016). Flexibility is a crucial component of these contracts since failures and outages are difficult to predict with accuracy (Rezaei Somarin et al, 2018).…”

Section: Tooling Mromentioning

confidence: 99%

Indirect Procurement: A Literature Review and Study of Trends

Israël¹,

Curkovic²

2020

AJIBM

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Indirect procurement is a diverse and crucial component of purchasing that has been largely ignored by scholarly research, due to representing only a small portion of manufacturing firms' expenditures. Indirect purchasing also suffers from confusing nomenclature that makes drawing conclusions from multiple sources difficult. Proper management of indirect spending allows for sustainable competitive advantages and reduced costs. By performing a keyword search in multiple comprehensive databases, we analyzed, consolidated, and summarized the current areas of research as it pertains to indirect procurement. We also identified areas for future research by identifying gaps from our analysis. We find that much of the current research has focused on the procurement of Maintenance, Repair, and Operating (MRO) items and Information Technology (IT). MRO purchasing was also found to have confusing nomenclature, as the term can be used to refer to very different types of purchases. We make distinctions between these types and draw conclusions accordingly. For both MRO and IT research, we found that most research focuses on supplier relationship management, as well as the optimal degree of employee involvement in these purchases. While many studies stress the importance of properly managing indirect suppliers and engaging all stakeholders in indirect purchasing decisions, very few provide a successful framework for doing so. This paper serves multiple purposes. First, it seeks to consolidate and provide new definitions for indirect procurement terms in order to make future scholarly research easier. Second, it seeks to understand what research has been completed already in this field, and synthesizes the research into meaningful groups. Finally, it identifies areas for future research. This is an important endeavor because we seek to summarize and refocus a burgeoning field of study, allowing future researchers to easily understand what has already been studied.

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Section: Tooling Mromentioning

confidence: 99%

Indirect Procurement: A Literature Review and Study of Trends

Israël¹,

Curkovic²

2020

AJIBM

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“…As the equipment ages and becomes obsolete, the suppliers may gain more revenues, and the resulting costs will be borne by the customers [4][5][6][7][8].…”

Section: Introductionmentioning

confidence: 99%

Maintenance Optimization Based on Three-Stage Failure Process under Performance-Based Contracting

Zhu

Zhao

et al. 2021

Mathematical Problems in Engineering

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As a new form of support contract, performance-based contracting has been extensively applied in both public and private sectors. However, maintenance policies under performance-based contracting have not gotten enough attention. In this paper, a preventive maintenance optimization model based on three-stage failure process for a single-component system is investigated with an objective of maximizing the profit and improving system performance at a lower cost under performance-based contracting. Different from conventional optimization models, the step revenue function is used to correlate profit with availability and cost. Then, a maintenance optimization model is proposed to maximize profit by optimizing the inspection interval. Moreover, the customers’ upper limit of funds is considered when we use the revenue function, which has rarely been considered in past studies. Finally, a case study on the cold water pumps along with comparison of linear and step revenue function and sensitivity analysis is provided to illustrate the applicability and effectiveness of our proposed approach.

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“…In recent years, with the wide application of PBC, the research on PBC has gradually increased. However, most existing studies on PBC concentrate on contracts [13,14], risks [15][16][17][18], incentives [19,20], and performance metrics [21]. Tan [14] developed a distribution-free contract that sets the guaranteed energy savings level based on the mean and the standard deviation of the energy savings and the profit-sharing ratio between the energy service companies (ESCO) and the energy user.…”

Section: Introductionmentioning

confidence: 99%

Condition-based Maintenance Optimization for Gamma Deteriorating Systems under Performance-Based Contracting

Zhu

Wen

et al. 2021

Preprint

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As a new form of support contract, performance-based contracting (PBC) has been extensively adopted in industry and manufacturing recent years. However, maintenance optimization problems under PBC have not received enough attention. In order to further expand the application of PBC in the field of maintenance optimization, we investigate the condition-based maintenance (CBM) optimization for gamma deteriorating systems under PBC. Considering the repairable single-component system subject to the gamma degradation process, this paper proposes a CBM optimization model with an objective of maximizing the profit and improving system performance at a lower cost under PBC. In the proposed CBM model, first inspection interval is considered to reduce the inspection frequency and the cost. Then, a particle swarm algorithm (PSO) and related solution procedure are presented in order to solve the multiple decision variables in our proposed model. Finally, a numerical example is provided to illustrate the applicability and effectiveness of our proposed model. Through comparing the proposed policy with the conventional one, the superiority of our proposed policy is proved, which can bring more profits to providers and improve performance. Sensitivity analysis is conducted to investigate the effect of corrective maintenance cost and time required for corrective maintenance to optimization policy. Comparative study is given to illustrate the necessity of distinguishing first inspection interval and repeat inspection interval.

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Valuation of performance-based contracts for capital equipment: A stochastic programming approach

Cited by 11 publications

References 15 publications

Indirect Procurement: A Literature Review and Study of Trends

Indirect Procurement: A Literature Review and Study of Trends

Maintenance Optimization Based on Three-Stage Failure Process under Performance-Based Contracting

Condition-based Maintenance Optimization for Gamma Deteriorating Systems under Performance-Based Contracting

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