Joint Optimization of Asset and Inventory Management in a Product–Service System

Abstract

We propose an integrated model of the asset management decisions for a fleet of identical product units and the inventory management decisions for a closed-loop supply chain in the context of a product–service system, in which the two types of decisions are closely coupled. A joint optimization technique is developed to obtain the parameters of the operational policy for the integrated model that minimize the long run average cost rate. A numerical example is provided to illustrate the computational procedures. In addition, the effect of a simplifying assumption that the replaced products have no quality difference is evaluated and the results suggest that as long as the quality difference between the preventively replaced products and failure replaced products is not too big, the simplification to treat them as one category is reasonable.

Notes

The terms “servicizing” and “PSS” are used interchangeably.

Additional information

Notes on contributors

Xiang Wu

Xiang Wu received his Ph.D. degree from the Department of Industrial and Manufacturing Systems Engineering at Iowa State University. His research interests include stochastic modeling and optimization, reliability and maintenance, and production scheduling. He is working as a data scientist at Adobe System Inc.

Sarah M. Ryan

Sarah M. Ryan, a senior member of IIE, is Professor and Director of Graduate Education in the Department of Industrial and Manufacturing Systems Engineering at Iowa State University. She teaches courses in stochastic modeling and optimization and conducts research on electric power systems, capacity expansion, and closed loop supply chains. Her work has been published in IIE Transactions, Operations Research, Management Science, and several other archival journals.