Cost Optimization for Canary-Equipped Electronic Systems in Terms of Inventory Control and Maintenance Decisions

For electronic systems equipped with early warning devices known as canaries, the early warning of failure can provide the opportunity for better spare-parts ordering, timely replacement of parts, and a resulting reduction in system life cycle costs. This paper presents both theoretical and simulation-based models for spare-part ordering and system replacement decisions for systems equipped with canaries. We first develop a theoretical model for the expected total cost per unit time in terms of the order interval, and maximum allowable stock level. This model is then compared with a simulation algorithm to validate the model. On the basis of the simulation algorithm, at each ordering point, we remove the constraint of a maximum allowable stock level, and order a quantity proportional to the predicted replacement quantity based on the expected number of canary warnings over the next order period. We then further expand the model to consider the risk (after a canary warning) with respect to the expected cost for delaying the replacement until the next order arrival point if a spare is not available, and then decide whether to replace the system immediately or wait. Finally, we consider the case where a preventive maintenance plan is in place. The comparison using numerical examples among all developed models and algorithms shows that the expected total operating cost in terms of inventory and maintenance is lowered significantly when the canary is used, and particularly when the risk analysis is implemented.