A discrete-time order-replacement model with time discounting and spare part provisioning

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Purpose - To determine the optimal spare part order-replacement policy for any high cost single unit complex system in a discrete-time circumstance. Design/methodology/approach - The expected total discounted cost over an infinite planning horizon is taken as a criterion of optimality as it allows us to put emphasis on the present behavior of the system. Findings - The problem under consideration is a two-dimensional discrete optimization problem (regular ordering time and inventory time limit for the spare are decision variables) which is difficult to handle, in general. However, it is explored that the problem can be reduced to a simple one-dimensional one and the optimal ordering time is to be determined under the two extreme situations: no replacement of the spare until the original unit fails and replacement of the spare as soon as it is delivered. Research limitations/implications - For modeling simplicity, deterministic lead time is considered for both regular and expedited orders. A more appropriate assumption would be to consider randomized lead time for both the orders. Practical implications - The research provides a useful order-replacement strategy for a single-unit system where the failure of the unit is better measured by the number of cycles completed before failure rather than the instant of failure. Originality/value - The work done in this paper carries certain values as any continuous time model for the problem under consideration can be regarded as only an approximate model.

Keywords: Optimization Techniques; Production Planning; Spare Parts

Document Type: Research Article

DOI: http://dx.doi.org/10.1108/13552510510616414

Publication date: March 1, 2005

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