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Replacement of Randomly Deteriorating Equipment

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  • M. Eisen

    (International Business Machines Corporation, Yorktown Heights, New York)

  • M. Leibowitz

    (International Business Machines Corporation, Yorktown Heights, New York)

Abstract

The replacement of a machine which deteriorates at a random rate is considered. We measure this deterioration in terms of a cost per unit time--i.e., a cost-density \gamma (t) where t is the age of the machine. Given the probability distribution of \gamma (t) and the replacement cost R(c, t) when \gamma (t) - c, we discuss optimal replacement using two different procedures: (1) replacement at a fixed age (2) replacement when the cost-density reaches a given value Expressions are derived for the resulting costs incurred in using either procedure over a long period of time. Method (2) is in general preferable.

Suggested Citation

  • M. Eisen & M. Leibowitz, 1963. "Replacement of Randomly Deteriorating Equipment," Management Science, INFORMS, vol. 9(2), pages 268-276, January.
    • Handle: RePEc:inm:ormnsc:v:9:y:1963:i:2:p:268-276
    DOI: 10.1287/mnsc.9.2.268
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