Integrated maintenance and production control of a deteriorating production system. (Full version of current paper

We consider a make-to-stock production/inventory system consisting of a single deteriorating machine which produces a single item. We formulate the integrated decisions of maintenance and production using a Markov Decision Process. The optimal dynamic policy is shown to have a rather complex structure which leads us to consider more irnplementable policies. We present a double-threshold policy and derive exact and approximate methods for evaluating the performance of this policy and computing its optimal parameters. A detailed numerical study demonstrates that the proposed policy and our approximate method for com-puting its parameters perform extremely well. Finally, we show that policies which do not address maintenance and production control decisions in an integrated manner can perform rather badly. I