Coordinating Failed Goods Collecting Policies and Repair Capacity Policies in the Maintenance of Commoditized Capital Goods Henny P.G. van Ooijen J. Will M. Bertrand Nasuh C. Büyükkaramikli

OUTLINE Background Commoditized systems Repair shop Collecting policies Capacity policies Model Computational study Conclusions 2 February 2012

COMMODITIZED SYSTEMS High number of end users Low technological/financial barriers -> easy entry of repair market Short term availability of substitutes (e.g. by leasing) 3 February 2012

REPAIR SHOP Repair shop (Maintenance Service Provider) Maintenance service for commoditized systems − failure due to (sub-)system failure Defective systems are replaced by rented systems for a fixed time Responsible for downtime Repair shop characteristics − capacity of the shop determines the speed of repair; capacity level: the processing rate 4 February 2012

Collecting Policies Immediate collection Periodic collection (milk run) 5 February 2012

Capacity Policies Availability based policy: There is always a fixed amount of capacity available Usage based policy Periodic capacity contract − A specific amount of capacity is available at the start of a period − Only paid for in proportion to the hours the capacity is used during the period 6 February 2012

Research Question For what environments does periodic collection whether or not in combination with a usage based capacity policy lead to “overall” benefits? 7 February 2012

Problem Given An overall failure rate λ, transportation costs t c capacity costs (permanent c p, contingent c c ) machine downtime costs B system rental costs (h τ ), a capacity sell-back ratio R, minimize total costs by decisions on: transportation policy capacity policy − terms of the capacity contract (level, period length) rental period L 8 February 2012

Model I: tranportation costs Immediate collection: Periodic collection 9 February 2012

Model II: capacity costs 10 February 2012

COMPUTATIONAL STUDY (I) Cost price system:€ Normalized arrival rate: λ=1 per time unit (week/day) defects System renting cost: h=€11, €15, €20 per hour Downtime cost:B=€5000, €10000, €20000 per unit down per week Capacity costs: c p = €2400 per unit Sell-back parameter:R=0.2, 0.5, 0.8 Transportation costs:€90, €120 per hour Area size: sqm, sqm 11 February 2012

COMPUTATIONAL STUDY (II) Immediate collection, availability based capacity  Periodic collection, availability based capacity Immediate collection, availability based capacity  Periodic collection, usage based capacity % Cost savings: (TRC * i – TRC * p )/TRC * i 12 February 2012

RESULTS (I) 13 February 2012

RESULTS (II) 14 February 2012

CONCLUSIONS (I) Transportation point of view: periodic collection always leads to benefits; benefits increase with increasing λ Also customer related aspects included: positive effects are canceled out by extra rental Also MPS aspects included: Availability policy: decrease positive effects due to bursty arrival pattern (unless a high λ) Usage policy:benefits can be obtained for smaller values of λ (λ = 1: up to 38% cost reduction) some cost parameter instances: loss in savings (up to 126%) 15 February 2012

CONCLUSIONS (II) Usgae based policy often outperformed by the availability based policy % savings increase with increase in α The higher Δ the lower the % savings The higher h τ the lower the % savings In most cases the system chooses the shortest possible period length  indicates importance of fast response to the system state 16 February 2012