Economic feasibility analysis for insourcing hydraulic maintenance services using the Monte Carlo method

Abstract

Abstract Maintenance plays an indispensable role in the productive sector of an organization. The increasing use of high-precision operations in the steel industry means that hydraulic systems demand greater attention. This study proposes an evaluation framework for analyzing the economic feasibility of insourcing hydraulic maintenance services, seeking to present tools for assisting managers in decision-making and optimizing maintenance strategies. This paper presents a cash flow study, where the Net Present Value (NPV), the Internal Rate of Return (IRR), and the Profitability Index (PI) are calculated. Subsequently, the Monte Carlo method is applied to perform a sensitivity analysis for viewing the probabilities and output results. The main contribution of this study is to enable the evaluation of the results considering the economic feasibility of insourcing or outsourcing maintenance contracts through the proposed framework. In this case, the economic viability of insourcing presents a cost reduction in maintenance services. This approach suggested an industrial case study, where the use of the Monte Carlo and cash flow methods are useful tools for decision-making, contributing to the optimization of resources among industrial managers.