A predictive maintenance policy considering the market price volatility for deteriorating systems

Abstract In reality, under the impacts of market dynamism and uncertainty, various input costs of maintenance optimization programs such as spare part cost strongly fluctuate over time. This paper aims at introducing the market price volatility (fluctuation) into the predictive maintenance optimization framework. To this end, we first adopt a Cox-Ingersoll-Ross (CIR) process to describe the evolution of interest rates and a log-diffusion process to model fluctuating maintenance costs. An adapted predictive maintenance policy is then proposed. According to the policy, maintenance decisions are made based on the predictive information about both the system health state and the price volatility level. The consideration of price volatility helps to reduce the negative impacts of the cost fluctuation on the maintenance decision-making, but it makes the evaluation of maintenance performance more complex. To overcome this issue, an analytical solution is developed based on the semi-regenerative properties of the maintained system. Finally, different theoretical and numerical studies confirm the necessity of taking into account the price volatility and the effectiveness of the proposed policy.