Maintenance-outsourcing contracts for a system with backup machines

In this paper, we consider a system with multiple components, each prone to failure, during which production is halted. Minimal repair is performed by an external contractor whenever a component breaks down. The contractor also conducts a general preventive maintenance (PM) for the whole system at pre-determined times. The contractor’s goal is to minimise maintenance-related costs; however, the system (made up of the contractor and the manufacturer, who gains revenue whenever the system is up) profit would be maximised if the revenue is also considered. Since these goals usually require different PM schedules, we propose a cost subsidisation scheme which coordinates the system. We then extend this basic model by considering the existence of a backup machine which will allow the system to continue running (albeit, generating a lower revenue) whenever a component fails. We show that the existence of such a machine reduces the profit difference between uncoordinated and coordinated systems.