The final order problem for repairable spare parts under condemnation

Abstract

We consider a manufacturer of complex machines that offers service contracts to her customers, committing herself to repair failed spare parts throughout a fixed service period. The suppliers of spare parts often discontinue the production of some parts as technology advances and ask the manufacturer to place a final order. We address the problem of determining final orders for such spare parts. The parts that we consider are repairable, but they are subject to the risk of condemnation. We build a transient Markovian model to represent the problem for a repairable spare part with a certain repair probability and repair lead time and we present some approximations that allow for further real-life characteristics to be included. Furthermore, an approximate model that can be computed more efficiently is presented, and the sensitivity of the results obtained with respect to the problem parameters is discussed, helping us develop several managerial insights.

Keywords:

• final order
• repairable inventory theory
• condemnation
• spare parts management