Optimal preventive maintenance of leased equipment with corrective minimal repairs

For leased equipment, the lessor carries out the maintenance of the equipment. Usually, the contract of lease specifies the penalty for equipment failures and for repairs not being carried out within specified time limits. This implies that optimal preventive maintenance policies must take these penalty costs into account and properly traded against the cost of preventive maintenance actions. The costs associated with failures are high as unplanned corrective maintenance actions are costly and the resulting penalties due to lease contract terms being violated. The paper develops a model to determine the optimal parameters of a preventive maintenance policy that takes into account all these costs to minimize the total expected cost to the lessor for new item lease. The parameters of the policy are (i) the number of preventive maintenance actions to be carried out over the lease period, (ii) the time instants for such actions, and (iii) the level of action.