Equipment Replacement Optimization

Abstract

This paper provides a comprehensive literature review of the state of the art and state of the practice of equipment replacement optimization (ERO). A comprehensive dynamic programming (DP)–based optimization solution methodology is then proposed and implemented for ERO. The developed ERO software consists of three main components: a SAS macro-based data cleaner and analyzer, which undertakes the tasks of raw data reading, cleaning, and analyzing, as well as cost estimation and forecasting; a DP-based optimization engine that minimizes the total cost over a defined horizon; and a Java-based graphical user interface (GUI) that takes parameters selected by users and inputs from users, and coordinates the optimization engine and SAS macro-based data cleaner and analyzer. The first component (i.e., the SAS macro-based data cleaner and analyzer) is presented in detail. Preliminary numerical results of the SAS data analysis, estimation, and forecasting of several costs are also discussed. In a later report of research, the DP-based optimization engine and ERO software development (including the Java GUI) will be presented in detail, and comprehensive ERO numerical results will be given.