Publication Type

Working Paper

Publication Date

6-2010

Abstract

An inherent challenge of using Performance-Based Logistics (PBL) contracts for aircraftmaintenance, repair and overhaul (MRO) services is pricing. As with traditional bricks andmortar services, under-priced contracts cannot cover costs, while overpriced contracts loseout to competition. Furthermore MRO services have an additional element of uncertainty.Performance uncertainties arise due to the inability to accurately forecast demand of spareparts, while cost uncertainties are a result of globally distributed operations subjected tofluctuating economic conditions. Previous work to solve this contracting problem adoptedthe principal-agent model, obtaining an optimal solution from the perspective of both riskaverseparties (i.e., a price-sensitive customer and a profit-driven service provider). Thiswork presents a model that extends existing models by incorporating integrality constraints.Using the metaheuristics, Simulated Annealing algorithm, we show how the new non-linearmixed integer programming model can be efficiently solved by implementing appropriatealgorithms for (a) initial solution derivation, (b) next solution (neighbour) generation, and(c) worse solution acceptance criterion. The algorithm has been tested with real operationaldata and a graphical representation of the results will be provided and analyzed.

Discipline

Business Administration, Management, and Operations | Strategic Management Policy

Research Areas

Operations Management

First Page

1

Last Page

22

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

https://www.researchgate.net/publication/303446750_Exploiting_Metaheuristics_to_Strategize_on_Performance-Based_Logistics_Contracts_for_MRO_Services

Share

COinS