Research On The Integrated Design And Application Of Business Interruption Insurance And PBC For Spare Parts Logistics Service

Spare parts logistics service is refer to the maintenance service which is outsourced to suppliers.And suppliers provide capacity of maintenance and spare parts logistics which includes capacity of maintenance service and spare parts.Performance-based contracting(PBC)has emerged as an effective means in the field of mission-critical equipment service.PBC can not only improve the reliability of mission-critical equipment,but also reduce the overall cost.More and more firms outsource the maintenance service of mission-critical equipment to suppliers using PBC.Mission-critical equipment is the fundamental or the only source of profits.Firms will have serious risk of loss profits when mission-critical equipment suffer disruptions suddenly.In this case,customers need to design a suitable mechanism so that the suppliers offer optimal restoration and recovery services to the customers.No matter how to incentive suppliers to invest capacity of maintenance and spare parts logistics service,sudden failure of mission-critical equipment cannot be avoided completely.The purchase of business interruption insurance is an effective strategy to ease the serious risk of sudden failure.Firms need to analyze whether the business interruption insurance increases profits to decide whether to buy business interruption insurance or not,and understand the law of mutual influence between PBC and business interruption insurance.Currently,the study of PBC mainly focused on how to design PBC of the after-sales service operation and the service capacity of suppliers.The research on the combination of business interruption insurance and operation is little and mostly is concentrated in the risk of raw materials shortage.There is no research on the application in equipment maintenance service of business interruption insurance.This paper studies integrated design of business interruption insurance and PBC for small failure rate and serious loss,mainly concluding:(1)Integrated design of business interruption insurance and PBC whose performance indicator is backorder.The failure unit models as an M/G/? queue in maintenance center.The supplier employs(S,S-1)as base stock policy.This paper studies the spare parts inventory of suppliers and how to design optimal parameters of PBC whose performance indicator is backorder and discusses the condition of purchasing business interruption insurance using principle-agent theory as modeling framework.(2)Integrated design of business interruption insurance and PBC whose performance indicator is cumulative downtime.Spare parts,maintenance personnel and their capacity are ed into capacity of maintenance and spare parts service.And this paper studies the optimal capacity of maintenance and spare parts service,and how to design optimal parameters of PBC whose performance indicator is cumulative downtime and discusses the condition of purchasing business interruption insurance using principle-agent theory as modeling framework.(3)This paper shows the application of the integrated design of PBC and business interruption insurance.Taking landing gear spare parts logistics service of M airlines as an example,this paper analyzes the integrated design of the business interruption insurance and PBC of M airlines,and verifies the practicablity and rationality.By summarizing the research work,the optimal parameters of PBC under two performance indicators are given.By comparing the profits with and without business interruption insurance,this paper concludes when to purchase business interruption insurance,and provides a theoretical guidance to the firms of how to design PBC and when to purchase business interruption insurance.