Optimal preventive maintenance strategy for leased equipment under successive usage-based contracts

Abstract

In the context of equipment leasing, maintenance service is usually bundled with the leased equipment and offered by the lessor as an integrated package under a lease contract. The lessor is then responsible to prescribe an effective maintenance policy to keep the equipment operational in an economical way. This paper investigates upgrade and preventive maintenance (PM) strategies for industrial equipment during successive usage-based lease contracts with consideration of a warranty period, from the lessor's perspective. The accelerated failure time model and age reduction model are adopted to capture the effect of usage rate and imperfect PM/upgrade on the equipment reliability, respectively. More importantly, since equipment usage rates may vary across different lease contracts, this study develops an age correspondence framework to characterise usage rate shifts between successive lease periods. The optimal upgrade degree and the optimal number and level of PM actions are progressively updated for each upcoming lease period to minimise the total expected lease servicing cost, by considering the usage rate and maintenance implementation history. Numerical studies show that under given cost structures, periodical PM activities within each lease period tends to outperform the pre-leasing upgrade actions, though both of them can reduce the lease servicing cost.

Keywords:

• Successive leasing
• usage-based contract
• warranty
• upgrade
• maintenance management
• cost analysis

Acknowledgements

The authors are grateful to the associate editor and the anonymous referees for their helpful comments and suggestions to the original version of this paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the Research Grants Council of Hong Kong under a Theme-based Research Fund [grant number T32-101/15-R] and a General Research Fund [grant number CityU 11203815], and also by the National Natural Science Foundation of China [grant number 71532008, 71601166].