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Equipment replacement under technological change

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  • James C. Bean
  • Jack R. Lohmann
  • Robert L. Smith

Abstract

For infinite‐horizon replacement economy problems it is common practice to truncate the problem at some finite horizon. We develop bounds on the error due to such a truncation. These bounds differ from previous results in that they include both revenues and costs. Bounds are illustrated through a numerical example from a real case in vehicle replacement. © 1994 John Wiley & Sons, Inc.

Suggested Citation

  • James C. Bean & Jack R. Lohmann & Robert L. Smith, 1994. "Equipment replacement under technological change," Naval Research Logistics (NRL), John Wiley & Sons, vol. 41(1), pages 117-128, February.
    • Handle: RePEc:wly:navres:v:41:y:1994:i:1:p:117-128
    DOI: 10.1002/1520-6750(199402)41:13.0.CO;2-U
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    References listed on IDEAS

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    1. Suresh Chand & Suresh Sethi, 1982. "Planning horizon procedures for machine replacement models with several possible replacement alternatives," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 29(3), pages 483-493, September.
    2. James C. Bean & Robert L. Smith, 1985. "Optimal Capacity Expansion Over an Infinite Horizon," Management Science, INFORMS, vol. 31(12), pages 1523-1532, December.
    3. James C. Bean & Robert L. Smith, 1984. "Conditions for the Existence of Planning Horizons," Mathematics of Operations Research, INFORMS, vol. 9(3), pages 391-401, August.
    4. James C. Bean & John R. Birge & Robert L. Smith, 1987. "Aggregation in Dynamic Programming," Operations Research, INFORMS, vol. 35(2), pages 215-220, April.
    5. Jeremy F. Shapiro & Harvey M. Wagner, 1967. "A Finite Renewal Algorithm for the Knapsack and Turnpike Models," Operations Research, INFORMS, vol. 15(2), pages 319-341, April.
    6. Robert L. Smith, 1979. "Turnpike Results for Single Location Capacity Expansion," Management Science, INFORMS, vol. 25(5), pages 474-484, May.
    7. Chung-Yee Lee & Eric V. Denardo, 1986. "Rolling Planning Horizons: Error Bounds for the Dynamic Lot Size Model," Mathematics of Operations Research, INFORMS, vol. 11(3), pages 423-432, August.
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    Cited by:

    1. Israel David & Eitan Greenshtein & Avraham Mehrez, 1997. "A dynamic‐programming approach to continuous‐review obsolescent inventory problems," Naval Research Logistics (NRL), John Wiley & Sons, vol. 44(8), pages 757-774, December.
    2. Yatsenko, Yuri & Hritonenko, Natali, 2008. "Properties of optimal service life under technological change," International Journal of Production Economics, Elsevier, vol. 114(1), pages 230-238, July.
    3. Natali Hritonenko & Yuri Yatsenko, 2012. "Fleet replacement under technological shocks," Annals of Operations Research, Springer, vol. 196(1), pages 311-331, July.
    4. Joseph C. Hartman, 2000. "The parallel replacement problem with demand and capital budgeting constraints," Naval Research Logistics (NRL), John Wiley & Sons, vol. 47(1), pages 40-56, February.
    5. Richardson, Steven & Kefford, Adrian & Hodkiewicz, Melinda, 2013. "Optimised asset replacement strategy in the presence of lead time uncertainty," International Journal of Production Economics, Elsevier, vol. 141(2), pages 659-667.
    6. Yatsenko, Yuri & Hritonenko, Natali, 2011. "Economic life replacement under improving technology," International Journal of Production Economics, Elsevier, vol. 133(2), pages 596-602, October.
    7. Hongmin Li & Stephen C. Graves & Woonghee Tim Huh, 2014. "Optimal Capacity Conversion for Product Transitions Under High Service Requirements," Manufacturing & Service Operations Management, INFORMS, vol. 16(1), pages 46-60, February.
    8. Zhi‐Long Chen, 1998. "Solution algorithms for the parallel replacement problem under economy of scale," Naval Research Logistics (NRL), John Wiley & Sons, vol. 45(3), pages 279-295, April.
    9. Suresh Chand & Vernon Ning Hsu & Suresh Sethi, 2002. "Forecast, Solution, and Rolling Horizons in Operations Management Problems: A Classified Bibliography," Manufacturing & Service Operations Management, INFORMS, vol. 4(1), pages 25-43, September.

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