Spares provisioning under performance-based logistics contract: profit-centric approach

Abstract

Performance-based logistics (PBL) is emerging as a preferred logistic support strategy within the public sector, especially the Department of Defence. Under a PBL strategy, the customer buys performance, such as operational availability, mission readiness and operational reliability, instead of contracting for a specified collection of resources defining the underlying support infrastructure. The literature on PBL is still in its infancy and additional research is required to optimize logistic resources such as spare parts, equipment, facilities, labour etc within a PBL context. In this paper, an optimization model is developed for spares provisioning under a multi-item, multi-echelon scenario. The objective of the optimization model is to maximize the profit to the supplier under a PBL contract.