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This book analyzes various incentive mechanisms that
can be used to coordinate a manufacturer who has a
process with an increasing failure rate over time and
a contractor who performs the necessary maintenance
activities. It is demonstrated that the best
incentive mechanism is an incentive contract, which
is based on a combination of a target uptime level
and a bonus. This mechanism i) always leads to the
desired win-win coordination, ii) provides
flexibility in allocating the extra profit generated
from coordination, iii) motivates the contractor and
the manufacturer to continuously improve efficiency
of maintenance operations, and iv) is able to
coordinate the improved system most of the time.
An extension of this study - with a manufacturer, who
has a process consisting of multiple stages and
multiple contractors, who perform maintenance
activities for each of these stages - shows that the
aforementioned target-uptime level and a bonus scheme
provides benefits similar to the one manufacturer -
one contractor system.
can be used to coordinate a manufacturer who has a
process with an increasing failure rate over time and
a contractor who performs the necessary maintenance
activities. It is demonstrated that the best
incentive mechanism is an incentive contract, which
is based on a combination of a target uptime level
and a bonus. This mechanism i) always leads to the
desired win-win coordination, ii) provides
flexibility in allocating the extra profit generated
from coordination, iii) motivates the contractor and
the manufacturer to continuously improve efficiency
of maintenance operations, and iv) is able to
coordinate the improved system most of the time.
An extension of this study - with a manufacturer, who
has a process consisting of multiple stages and
multiple contractors, who perform maintenance
activities for each of these stages - shows that the
aforementioned target-uptime level and a bonus scheme
provides benefits similar to the one manufacturer -
one contractor system.