Abstract
AbstractDetermination of the optimum equipment replacement policy and time is of great economic importance. After a brief survey of the models which have been used for decision making, the paper looks at methods for detecting and quantifying growth of failure frequency (peril rate) in repairable equipment. It examines the trend detection methods of Laplace and Mann when the peril rate varies as a power of equipment age and also applies them to some actual field failure data. An economic model is developed, based on total discounted future cost and providing for ongoing future technological growth. The cost comprises not only the conventional cost of ownership, but also the shortfall between an equipment's achieved benefit and that which would be achieved by an ideal equipment in the same demand environment. The inclusion of this shortfall, called incapacity cost', enables the replacement decision to be based not only on the deterioration of equipment but also on its performance inadequacy and on the availability of technological improvement in present and future challengers.The formulation of the cost model is such that for both a single‐replacement finite planning horizon and an infinite horizon the total discounted future cost is readily computed for a range of alternative replacement times and the optimum replacement programme thereby determined. The sensitivity of total cost to the replacement times and the sensitivity of the optimum times to the variability of assumed input data are easily examined.The application of the model to traffic signal equipment is described. In this application the total cost is shared between the nominal owner of the equipment and the community.
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