Learning and forgetting effects on maintenance outsourcing

This article studies the effects of learning and forgetting on the design of maintenance outsourcing contracts. Consider a situation in which a manufacturer offers an outsourcing contract to an external contractor to maintain a manufacturing process. Under the contract, the contractor schedules and performs preventive maintenance and repairs the process whenever a breakdown occurs. Two types of learning effects on the cost and time of performing preventive maintenance are considered: learning from experience (natural) and learning by a costly effort/investment. It is assumed that forgetting occurs under each learning type. A model is developed for designing an optimal outsourcing contract to maximize the manufacturer's profit. An extensive numerical analysis is carried out to empirically demonstrate the effects of learning and forgetting on the optimal maintenance contract and the manufacturer's profit.