Incentive Maintenance Contracts for Optimizing Channel Profit

Hakan Tarakci, Melbourne Business School
Kwei Tang, Purdue University

Abstract

We discuss channel coordination in maintenance outsourcing contracts. We consider a service chain, including a manufacturer and a maintenance contractor that performs the manufacturer’s maintenance functions. The manufacturer wishes to maximize uptime whereas the contractor aims to minimize cost. Realizing the two parties have different goals, we propose three coordination methods for inducing the contractor to select the maintenance policy that optimizes the profit of the service chain.