The Decision-Making for the Optimization of Finance Lease with Facilities’ Two-Dimensional Deterioration

Abstract

In the past, most companies in developing countries usually own facilities or equipment for running their businesses. However, for some managerial and financial reasons, the situation may change. Recently, leasing facilities is becoming more popular than purchasing them. Furthermore, since the deterioration of equipment or facilities depends on both time and usage, when considering only one of the two factors, the deterioration estimation for the leased facilities could be distorted. Therefore, in such cases, a two-dimensional failure model would be appropriate for dealing with such problems. In this study, in order to determine the optimal lease decision for lessors, we use analytical models and efficient solution algorithms based on the two deterioration factors (time and usage). However, such complex mathematical models are difficult to apply in real cases, and therefore the study proposes the design of computerized system architecture and the corresponding solution algorithms to enhance the practicality of the applications. Besides, a nonhomogeneous Poisson process is employed to describe the successive failure times of the leased facility. Finally, the application and sensitivity analyses will provide managerial implications and suggestions for decision-makers under different preventive maintenance alternatives.