Is Reliability a Curse? Outsourcing Restoration Services for Infrequent, High-Impact Equipment Failures

Firms in industries such as aerospace and defense, high-tech manufacturing, and telecommunications rely on functioning mission-critical equipment and cannot afford significant operational downtime due to equipment failures. Although resolving problems quickly is essential to minimizing the impact of disruptions, the additional challenge in a decentralized supply chain is incentivizing the suppliers to provide prompt restoration services. A key obstacle is that equipment failures may occur rarely, making it very expensive for a supplier to commit the necessary resources since they will be idle most of the time.