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Abstract PBL Price Estimation Based on Weapon System and Logistics System Lee, Chang Ha Industrial Engineering The Graduate School Seoul National University In recent years the acquisition cost of weapon system has been increasing due to its high technologies and small production quantity. Therefore, the lifetime of a weapon system usually tends to increase consistently. As a consequence of this, the strategy to buy a new weapon system is less important than the strategy to sustain the weapon system. Under this situation it is very important issue to determine the after-sales service system to maximize the efficient use of the defense budget during the weapon system lifetime. There are two major types of after-sales service systems to sustain a weapon system. The first one is the traditional way which is inventory based logistics (IBL). The other one is performance based logistics (PBL), which has been emerging in recent years. Under PBL the service vendor is paid for their after-sales service based on the outcome of performance. The manager of military should consider the reasonable size of compensation fee to apply PBL. In case of PBL, the service vendor is in charge of
managing the spare parts and labor. Therefore, the military manager is not able to figure out the cost invested by the service vendor to achieve the performance and as a consequence of this he can not estimate the appropriate PBL price. This paper makes an attempt to find the conditions where IBL has no effect on the cost saving and to establish the appropriate PBL price based on weapon system and logistics system. With the results the military manager is able to negotiate to make better PBL contract. keywords : Availability, Spare Part Level, Inventory Based Logistics, Performance Based Logistics, Life Cycle Cost Student Number : 2012-22608