Replacement electricity bulbs, men, etc. Replacement is usually ca (i) When existing items have outl economical to continue with them anymore; (u) tems which might have been destroyed either by accident or The above replacement situations may be categorised into the categories t {a) Replacement ‘of items that deteriorates with time, e.g., vehicles, equipment, buildings. etc. (b) Replacement of items, whi certain amount of use, @-9,-» c) Replacement of an equipment Tene eg, ordinary weaving looms ‘accounting system. by computer system, etc. {d) The existing working staff in an organisation death, retirement, retrenchment and other reasons. 4 needed. j iat 8-2. FAILURE MECHANISM OF ITEMS The term ‘failure’ has a far wider meaning in everyday life and will be discussed in the context of two types of failure : (i) Gradual failure, (a) Gradual failure. The failure mechanism Le., as the life of an item increases, its efficiency (i) increased expenditure for operating costs, (i) decreased productivity of the equipment, (ii) decrease in the value of equipment, Le, the Examples « 1, Mechanical items like life pistons, bea (b) Sudden failure. This class of failure is deteriorate markedly with service but which ultin period between installation and failure is not co equipment but will follow some frequency distrib retrogressive or random in nature as shown below = Progressive UW) Progressive failure. Under this with Incrense: tnt Rie Cala (ii) Retrogressi . beginning of ere okiesTF DECISIONS 83 dom failure. Under this mechanism, constant Probability af oe ath items that fail from random, causes such as pir slated ” oud age. In such @ case, virtually all items fail before ng has fect. For i si vacuum tubes in alt-bore equipment have peered to fall at a rate pendent of the age of the tube, e ys. Oe METHODOLOGY OF SOLVING REPLACEMENT PROBLEMS R provides a methodology for tackling replacement. problem. The st sand for tackling such replacement problem in O.R. Tee bee Uaciseelins “Oh Went be items to be replaced and also their failure mechanism. There can wo type of failures, vlz., gradual and sudden. ttems such as machines, equipment, % follow gradual failure mechanism and they deteriorate with time Such type of jawres account for increased expenditure in the form of operat te productivity of the equipment and decrease in the value of the equipment, /.¢., de resale or salvage value. Items which follow sudden matime, thus precipitating cast of failure. ‘The cost of failure in some cases may be ute high as compared to the value of the item itself, Sometimes failure of an tem may cause loss of production and may also account for damaged or faulty products. In some cases failure may involve safety risks to personne! as well. To nod the cost of sudden failure, the concern should try to predict when such failures we Ukely to occur and try to replace the item before it actually fails, (i) Collect the data relating to the depreciation cost and the maintenance cost oer a time period from the available sources for the items which follow gradual failure mechanism, In the case of items following sudden failure mechanism collect he data for failure rates cost of replacement for failed items and cost of preventive replacement. (ii) On using, the above data, suitable model in OR (as discussed in the sechons| may be evalved for determining the exact time of replacing the tems. 6-3-1, Replacement of items that Deteriorates with Time (without change in mon ue). For finding the optimal replacement period of the items pertainaing to th class, welantheonieten basically two categories of costs. In one category, we have maintenance and. costs which tend to increase as the ee ‘ges. In the other WR depreciation cost which deminishes with | He ol the equipment. Further wa disregard the time vahie of money. The optimal replacernent of the equipment is calculated according to the following rules + | if the scrap value of the equipment is zero, Le.. the depreciation cost given, then replace the equipment when the maintenance cost becomes than the current average cost: + ae U given the resale value or the depreciation cost, the maintenance sod the Gast of the equapmant, then the optimal fepiecement period determined by the minimum value of the average cost to date, considered, the Interest rate is zero and the calculations can be based on average annual cost,= a4 OPERATIONS RESEARCH :TECHRAQUES op, Wrscee, (C= the capital cost of a certain item, say a machine. S(t) = the salvage or scrap value of the item after t years open - Ao = operating (or maintenance) cost of the item at time ¢, n= optimal replacement period of the tern, Now the annual cost of the machine at any time t = capital cost - scrap value + maintenance cost at time f = ¢ — si) since the total maintenance cost Incurred on the machine att + 0) and . * during m years [,fteidt, or Efe the total cost Ty acura co ee by TeC-si) +f flddt or C-Si+ E i 1 ‘Thus, the average annual total cost Incurred on the jem: . wawe ‘per year dig myers Tact [c-sw+ lana] or 1 [e-su, To determine the optimal period for the machine, differentiated with respect ton and to zer0,, la. c-S uA dt +} fh, Eeuaing fin) » = Si + LP ands e, fn) = Ta It can be easily established that this: solution Ta = fim) provided that fit) is non-decreasing and /l0) ~ 0. Hence, ar when the average cost to data becomes equal to the current Lith year, the th year bs 2. Under the assumption that maintenance oF © inereasing monotonously we can depict the average corresponding to minimum point of the curve repres 3. The two categories of costs to determi replacement of an equipment which has a gradual faihsre m (i) Depreciation cost, (ii) Operating cost, \i) Computation of Speen cost. There computing depreciation, of the methods which {a) Straight line method. This method p ‘equal periodic charges over the assumed lifepecisions 85 al value method. Depreciation here is calculated on the “down value of an asset. The written down value fae he Bi ted value of an assert every year. For example, if the original cost of operat the 2580 is Rs. 10,000 and the depreciation is charged @ 20%, the sPerations, th ealion in the fist year willbe Rs. 2,000, and inthe next year, 20% of . (0,000 - 2,000) = Rs. 8,000, i.e., Rs. 1,600, and so on. (Rs. I .preciation cost may also be determined by estimating the resale value S FoR MANag, MENT sid! iter eprecia the de (0 Tipe asset at the end of each year. The cost in the beginning of the year © ~ sit) 4 Jess the resale value et the end of the year will give the depreciation cost, faring’ nd) nd yy computation of operating cost. This Includes cost Incurred under the TS is HM Years is ae, — md heads = {a) Cost of new spares used (b) Cost of repairs {e) Cost of maintenance staff of the equipment (d) Preventive maintenance cost z ro] {e} Cost of loss due to breakdown 70 {Cost incurred on safety measures for life of human beings. This cost can only be estimated on the basis of past experience. fe eanphton. The following table gives the running costs per year and resale get ues of Zertain equipment whose purchase price is Rs. 65,000. At what year Is the replacement due optimally:— 1 2 3. 4 5 6 7 8 ar during n years above function is Year funning Cost (Rs) : 14,000 15,000 17,000 20,000 24,000 28,000 33,000 32,000 inimum for T, ele Values): 40,000 30,000 22,000 17,000 13,000 10,000 10,000 10,000 ld ‘be replaced Solution, Hore we are given the running cost, Rit), the resale (or salvage) value , Si) and the purchase price, C= Rs. 65,000. Let it be profitable to replace the vases from (r-+ equipment after n years, where nis determined by the minimum value of the average splacement. annual cost per year which is worked out as under: sts would be Total cost in one year nd the period Running cost in first year + Loss in purchase price | replacement = 14,000 + (65,000 ~ 40,000) ~ 39,000 ‘Average cost in one year = Rs. 39,000 Total cost upto two years "Running cost uplo two years + Loss in purchase price sabe to = (14,000 + 15,000) + (65,000 - 30,000) = Rs. 64,000. - availa ¢ per year during the first two years = Rs, 32,000 ral period for are descril 1. Average cost Proceeding in a similar fashion, average cost per year during first three years ans of can be obtained, (.€-+ by a = 89,000/3 = Rs. 29,6667 .ciation under rege cost per year during first four years = 1,14,000/4 = Rs. 28,500 and so on. Similarly ave! set“ dailies. OHIO FOF iy, Hider compulations iiay be aunimnarinad in the Selene TARLE A CHOTA TION OF CHTMAL i wiry Cwveihthe — Slewale Catal | pe itis WAM f- al = | farwd «if yer) cael | ter ite) ited | ' We) a) ath | a wi i) a i bo) TA000 40,000" 9 16.000 1.000 90,000. , 17.000 46,000 2.000 | ‘ wom0 66,000 17,000 | p 000 -0,000 1,000 6 0K 11,000 10,000 | ’ ue 1,000 10,000 | ‘ w.000—1,90,000 10,000 w wbowe lable shown that the lowest average cost p nquipment at the end of (ith yawn Aw tipment ie at the end of every fUth year, If th holley Is adopted by the company then the aversge vg for the previ Ww Re, 28,400 - fa 0-2. A machine shop has a press which ts to bs f ve prone We to be installed now and an optimal r y which the press sno langer required, Fo Cot of naw machine (ite, Salvage value (ay ! 6,000 ’ 5,250 ’ 6,00 4 6,000 4 6,600 6 260 7 4.000 Hind an optinal replacement polley. Solutions Using the given int ire cunnpne h aowag tables tem the Cumnitatiow Oberning post—— gp ACEMENT DECISIONS 87 the minimum value of the:2versge cost in ithe last column occurs at the _adof the third year, we conclude thar (ts profitable to replace the press at the end eh irm Is considering the replacement chine. The purchase tramole 92 shen 16,600 while een hey its scrap value is Rs 1,600. The date on pares cost in various years are as follows» Yeor | 2 ese = Bg wwe Re) = 800 “700° a1008 1,500 What ts the optimal replacement interval ? Solution. Hore we are given the maintenance cost Mit), the scrap value S(t) and h nachine as C = RS. 16,600, We now compute average cost soit le of the machine as som inthe heer ea ba : TABLE 8:3. CALCULATIONS FOR AVENAGE MAINTENANCE Cost 2100 2.500 3,600 4,800 6,200 (Ra) ‘TW=C-8 + mun) ATC, {b) Another machine B costs Rs. mt Rs. 4.000 and they increase vie?” °/ tyPe A whieh is one year old. lable in @ year. ugltion. (a) ‘The operating cost 0 Your ou Srercting cote (i) 2,000 LLS| 88 OPERATIONS RESEARCH : TEGHNOUES FOR waar, To lind average cost per year of machine A, we prepare the following Toble gg TABLE B.4 CALCULATIONS FOR AVERAGE COST OF MACHINE 4, =. Scaiue tormue “ume? Dem R " Cumulative Depreesation Tote! cot Acer ned operating cost cost fin Re} pairila year (in fis) fin Re) ee | 4 2,000 80,000 22.000 aan 2 19,000 80,000 99,000 $3500 3 51,000 80,000 1.31.000 uy 4 98,000 80,000 1.78.00 4509 5 1.60.00 80,000 249.000 Bu 1 is clear from the table that machine A should be replaced at the end of ge year The average yearly cost of owning, and operating A in this sttustion wi be Rs. 43,666. (b) The operating cost of machine B are as follows = Your : 1 2 3 4 5 6 Operating costs (Rs): 4,000 11,000 18,000 25,000 32.009 33000 To find average yearly cost of machine B, we prepare the following Table 8.5 TABLE 85: CALCULATIONS. FOR AVERAGE COST OF MACHINE B Replocement Cumutative Gaptst Tota! cost Average ext atthe end of operating cost cost fin Rs) Pe sear (in Rs) tin Re) fn Re} 1 4.008 1,00,000 140,000 104.000 2 15,060 1,00,000 1,15,000 57.00 3 33,000 1,00,000, 133,000 33 4 88,000 100,000, 1,58,000 39,500 5 90,000 1,00,600 1,990,000 ‘3,000 6 1,29.000 1,00,000 2.29000 38.166 Wis clear from the Table 8-5 that if machine B is replaced after 5 years then 2 average cost per year is Rs. 38,000. Since the lowest average cost for machine 8 (Rs, 38,000) is less than the lowest average cost for machine A (Rs. 43.666) the machine A should be replaced by machine B. Now to find the time of replacement of Machine A by Machine B, we proceed as follows : The machine A ts replaced by machine B at the time fage), when its running cot of the next year exceed the lowest average yearly cost Rs. 38,000 of machine B. Further, the total cost of the machine A in the successive years are computed 2 follows Year 1 2 3 7 5 | Total cost 82.000 99,500 ta the year -#2.000 Gin Rs} = 17,000 The running cost of fourth year of the lowest average yearly cost Rs. machine A is Rs. 47,000 which Is more 120 38,000 of machine B. Therefore, the machine A should be replaced by machine 8. when it ‘ machine A Is 008 i sear Obl nour, should be replaced pats 228 ts 1 year. Since the mach! (c) Install new machine now and replace jt with machine B during the third yset— ——— ene DECIMIONS 89 Ope 5.A\ transport company ouns three min! buses each of which was ty has 80,000. The costs of running a bus together with resale value ore watts ape Running Cost Resale Value Year Running Cost Resale Value “ fin Bs) (in Rs.) fin Rs.) fin Rs) \ 3,000 70,000 5 8,000 32,000 7 3,600 61,000 6 11,200 20,000 4 4,800 55,000 ? 15,000 10,000 4 5,000 49,000 8 20,000 5,000 Two of these buses are two years old while the third one is one year old. The company contemplates replacing the buses by two full-stzed buses, each such bus “painting 40% more seating capacity than a mini bus, Estimates of the running (erreand the resale value af cach of the new buses are given below white each such hes would cost Rs. 1,20,000. You Running Cost Resale Value Year Running Cost = —- Resale Value fin Rad fin Rs.) iin Rs) fin Rs) 1 3,400 7,00,000 5 7.200 76,000 2 3.900 92,000 6 9,000 66,000 3 4,700 86,000 7 12,000 54,000 4 5,800 81,000 8 16,000 40,000 Should the mini buses be replaced with new full-sized buses? If not, why? if yes, then? Solution. We shall first calculate the minimum average cost for all types of buses TALE 86 CALCULATIONS FOR AVERAGE COST OF MINI BUS. Maintenance Cumulative Depreciation Total Average cont cont (Re J maintenance cost (Rs) cart (Re) cout (Rx) per year (Ra) Mia) EMit) C= Siti Te ATC, 3.000 3,000 10,000 13,000 13,000 3,600 6,600 39.000 25,600 12,800 4.800 41.400 25,000 400 12.133 5,000 16.400 31,000 47.400 vasar 8.000 24.400 43.000 72.400 14.489 1.200 35,600. 69000 95,600 15.933 15,000 50,600 70,000 120,600 17,229 79,000 70,600 75,000 145,600 18200 ____ TALE 8.7 : CALCULATIONS FOR AVERAGE COST OF FULL SIZED BUS ‘ Year Maintenance Cumulative Depreciation Total ord coat (ft) meintenance cost (Re) co (RLY cost (Re Mit) an c- sn) Te 1 3,400 3.400 20,000 23.400 2 3.900 7.300 28,000 35,300 4 4.700 12,000 34,000 46,0008-10 OPERATIONS RESEARCH -TECHAIQUES Fon 5,800 17,800 39,000 56,800 ™ 4 5 7,200 25,000 44.000 69,000 — 6 9,000 34,000 54.000 $8,000 _ | 7 42000 46,000 66,000 112, read 8 16,000 62,000 80,000 1424 a so OO ____ Thus minimum average cost for mil bus Rs. 11,850 and Re, 13.6p9 po a ized bus. However, these two should not be compared directly beear ful buses are equivalent to 2 large buses, Thus U8 thie mig, Average cost for all 3 mini buses = 3 x 11,850 = Rs, 35,550 Average cost for 2 new buses = 2x 13,800 ~ Rs. 27.609 Clearly, then, it is prudent to replace the mini buses by the full aussie tes whine BLUR the (enlcerient Wrebe ne aes frst find tee T® annual costs for the mini buses. The year in which the aver: Nota) ‘age cost of buses will be lower than the total cost of maintaining and runniny the tol! ew old be the year when the replacement should be done. ones shal | Yew 1 2 3 ‘ Tole! arinual: cent of mini bus 13,000 25,600- 13,000 36800-25600 47,400 - 36409 (Rs) = 12,600 = 10,800 = 11,000 5 5 6 a 72.400 47,400 95,600 - 72.400 1.20,600-95.600 1.95.60 - Langa = 25,000 = 23,200 = 25,000 = 5,000 Total cost for the next year would be: 2 x 10,800 + 12,600 » Rs. 34,200, {Since two of the buses would be running in the third year and the third one in the second year), Total cost for the subsequent years would be as follows: 211,000 + 10,800 = Rs, 32,800 2x 25,000 + 11,000 = Rs. 61.000 2% 23,200 + 25.000 = Rs. 71,400, and so on. Since the average cost of running two buses is Rs. 27,600 whereas in the years to come the cost of owning and running the old buses would be greater than this, the conclusion ts that the buses should be immediately replaced. 3-3-2. Replacement of Equipment that Deteriorates with Time (Money Yak also changes). For finding the replacement period of itera of this closs, we fst of al tabulate the net costs flows of the item. We then covert these costs to the Present value by discounting at the relevant rate. We use these discounted costs establish the total cost (in present value terms) thal has accumulated {rom Le of the operation to the end of each successive lme interval. We also accumulate values ol discounting factor from the he ol it start of ration to successive time interval. We then the ope r compute th erage of each sxctt time interval by dividing the total cost with the ear icting salve of ie acon! factor. ‘Suppose that the item (which be a pment atc) soo for use over a series of time periods of pal sentria algae Le € = Initial cost {or purchase price) of the item to be replaced R, = Running (or maintenance) cast in j th year fr = rate of interestSee y tem be replaced at the end of ith year, Then present Lat the vexpenditite on the item in the succenshe ¢ eyeles Cer eee can be th ed 08 follows a 7 7 amt cot te tat | ene nl cat [eee] - 3 that the item No’ resale price’ at the time of or of all future discounted costs sssoriated with the policy of replacing ’ item at the end of every n years will be given by » Pin) = UC + Ri) + Rou Rye? + Ravel} TC + Rien + Rem tL Ry Es Remy +1C + Ryo + Riutet y Ryerss Rule y gumming up the lalichand eid Pin) =(C + Ry) (14 um 4 pte y ood Rov (1 +o + oP +) +t Revel (Leute pty) = (C+ Ry 4+ Rove ot RU N ¢ e th g ae Waking (1+ 04.0% +...) a8 common} "(Co R + Roe FR) {+ -€1, the sum of infinte GP. is 1,11 ~ wi Pin} is the: amount of money required now to pay all the future wed operating the when it ts that any company: actually set (C + Ry) + Rov +. + Ry and n+ 1) > EARLS Re > +P bit As 9 ult of these two inequalities, rs for minimising costs Slows = 1. Do not replace if ‘weighted aa of 2 Replace if the operatin average of the previous Working Procedure P STEPS y ‘Stépment forrs ae PERATIONS RESEARCH : at? or EARCH : TECHNIQUES, Fog 4. These discounted maintenance costs are then cumulated to the get ER," Wh sey ‘The cost of machine or equipment Is added 10 the wakes obtsiney above to obtain C + IR,v"!. in G. The discount factors are then cumulated to get Fv™1, + total costs obtained in (Step 5) are divided by the co; TT tet cumulated discount factor for each of the years, "°*P"eing wa, » compare the column of maintenance costs which Fon com natty the last column. Replace the machine In te Le, ¢28anh the last column exceeds the column of maintenance costs, Sear that o le 8-6. The cost of a new machine ts Rs. 5,000. The Matnte, dart gets an yoo given By My » 500 x(n = hn Jy 2 Syne con discourft ratte per year is 0-05. After haw many years It will be economical i t the the machine by a new one ? ' Teplac tution. Since the discount rate of money per year is 0-05, the pre of sence to be spent over ina period of one year Is: Present wonh vp =(1 + 0.05)! = 0.9523 For the best replacement age, we compute the following table for the machine by using present worth of one tupee to be spent inn years from = onwards: TABLE 8 8 COMPUTATION OF WEIGHTED AVERAGE COST FOR MACHIE bo St 4 far Mai Ducounted Discounted ‘Discounted — Curmlathe Fe eee ctor maintenance total cost (Rs) discounted ones gel cost {cumulative} foctor cost ia) gm <@art—Rul coer get St From the above table, we find that the minimum value of column (7) occurs abet 5 years. hence it will be economical to replace the machine at the end of Sth yea". Exampte 8:7. A manufacturer is offered two machines A and B. A Is priced ot Rs 5,000 and running costs are estimated at Rs. 800 for each of the first five Fears increasing by Rs. 200 per year in the 6th and subsequent years. Machine B, has the same capacity as A, costs Rs. 2,500 but will have running costs of na per year for six years increasing by Hs. 200 per year thereajter. If money 1st 10% per year, which machine should be purchased? (Assume that machines eventually be sold for scrap at negligible price.) rm Solution. Since the discount rate of money per year is given as 10% present worth of the money to be spent over in a period of one year Is = v= (1+0-10}1 = 0.9091813 ‘cost analysis for machines A and B we y using the present worth of one rupee to be spent in n years time “i! hy by ; — Operating te Od molt fond mr i ance cat ao” a s) : 800 500 ; TE 1527 ia 800 0.8264 61 2188 4 so 607513 OL 2789 5 8006830 56 335 6 000.6209 621" 3956 7 1a 08685 gy 4633 s 1800 Obs 78 535L 5 (1600 O65 tag. eo? 1900 O42 763. ous From acm table, we conclude that for mschine A, 1,600 < 1,751. Srce the running cost of Sth year is, 1,600 and that of 10th 1,800 > 1751-72, fe, it | be. ral to r Rai Sey alle eonB14 OPERATIONS RESEARCH : TECHNIQUES FOR y for machine B. Hence, it is more economical to buy machine B rather than A machine ‘emark. Present value criteria of comparing replacement alternatives. Here the sonra Peete eure and reves calcite foreach aleratie aod th oe oy conch the present ylue Is minimann is preferred, Let ‘A the annual running cost. c present cost of an item. r the annual interest rate n «life of the item in years. s the scrap or salvage value of the item at the end of its life, Then the present worth of total cost during m years is given, by : P+ A (gnats for 196 interest for n years) 5 (Pwd for 7% interest for n’ years) si { the annual operating costs vary for different years then the present hasty Ae anol opera boas of tine period fr which thte expen ae mado, Le., tf Ay. Agy os An are the costs for different years then the present worth ‘of the total cost during n years wall be given a C +A; (Pufs at r% interest for 1 year) + Az (Pfs at 1% tnterest for 2 years) 4 oc + An (Purfs at 1% Interest for rm years) = $ (Puy for rb interest for n years) ‘Eva 8-8 Let the value of money be assumed to be 10% and su that pals A ts replaced after every three pears, whereas nachna (ee after every six years. The yearly costs of both the machines are glven'as under: Year 1 2 3 4 he! Machine A 1,000 200 400 1,000 200 MochineB : 1,700 100 200 300 400 Determine which machine should be purchased. Solution. Since the money carnes interest at the rate of 10% per present worth of money to be spent over a period of one year is given v = (100/(100 + 10}} = 0.9091 __TABLE 8.11 COMPUTATION OF PRESENT WORTH OF MACHINES A The total discounted cost or present worth for machine = 1,000 x 1+ 200 x 0.9091 + 400 x{0,90 000 + 181.82 + 330.60 = Rs. 1,51:(ep AOEMENT DECSIONS B15 The total discounted cost or present worth for machine B over six years ts - 1700 * 1 + 100» 0.909) + 200 x (0-9091F + 300 + (0.50911 « 400 x (0.909118 « 500 x (0.9091) = 1700 + 90.91 + 165.30 + 225 42 + 273.20 + 31045 = Rs. 2.76525 », Average cost per year of machine B = 2765.25 oGg, = Ps. 577-19 Since the weighted average cost of machine A ts less than f B, machine tau rot be replaced by machine B. jor thas thao B A frample 49. A present ts consider ting to purchase a machine for his own jctory Relevant data about alternative ‘ machines are as follows : Mochine A MochineB Machine © Present investment (Rs) 10,000 12,000 15,000 Tota! annual cost (Fs) 2,000 1,500 1,200 Life (years) 0 10 10 Sclvoge valle (Rs) 500 1,000 1,200 As an adulser to the buyer, you have been asked to select the best machine. considering 12% normal rate of return. You are given that : i) Single payment present worth factor (Pwf) @ 12% for 10 years = 0.322 ii) Annual series present worth factor (Pwfs) @ 12% for 10 years = 5 650 Solution, Here present value of total cost of each machine for a period of 10 years is to be calculated and the machine for which the present value is least is 10 be recommended. The calculations are shown tn the following table = TABLE 8 12 COMPUTATION OF PRESENT VALUE OF TOTAL COST FOR THREE MACHINES Present Present wlve Present wslue Net cont Moctine — intestment of total annus! of salvage Col 2 © Col 3=Col 4 cost toh fn Rs} I uu @) a a) 5I a 10,000 2,000 « 565 500 « 0.322 10,000 » 11.300 = 161 = 11,300 =161 = 21139 a 12,000 1.500 « 565 1.000 « 9.322 20,153 ~ 8475 = 322 c 15,000 1,200 «565 1,200 «0.322 213936 = 6,780 3864 From the above table, we conclude that the machine B having the least present *alue of total cost should be purchased 8-3-3, Replacement of tems that Fail Completely. In real hie, we always come ’ctoss some practical situations whore the failure of a certain item occurs all of a Sudden instead of gradual deterioration, e.g. electric light bulb, T.V. parts, etc., ‘hich result in complete breakdown of a system. The breckdown implies hess in Droduction, idle Inventory, immediate replacement of the ilem may not be es idle labour and many other losses, so that the failure of the lem puts the ‘“rganization to a heavy loss. Using the probability distribution of the dailure time ' item, following twa types of replacement policies have been developedan item ts ten replaced after its failure. mediately Group Reptacement Policy. Under this policy, decision is taken Fearne related \rasacike uf te ar tea tone ree folled oe han at failed, with the provision that if any item fails before the optimal time, it me hed replaced indwidually. Such policy generally requires twolold consideration, namely (i) the rate of individual replacement during the period, and (u) the total cost incurred for Individual and group replacements during the selected interval The period for which the total cost incurred is minimum will be the optimal for replacement. Thus lor the formation of group replacement policy one ig! know the probability of failure, loss incurred due to these fallures, cost af Ind replacements and cost of group replacements. The rule for calculating time of group replacement and the total cost Involved Is given below : (a) One should replace the group of items at the end of tth period t the costo individual replacement for rih period is greater than the average cost por through the end of tth period Period (b) One should not replace the group of items at the end of the tth period if the cost of Individual replacement at the end of (t- 1)th period 1s less than the cost per period through the end of the ith period, erage Ubdstration. To illustrate the comparison method for the two replacement plans e jer the data given below ; h DATA REQUIRED TO DETERMINE A GROUP REPLACEMENT POLICY w Se: Failure Basribution Repeat Agninuccks;) 1 2 9 4 5 6 9 inbidal Ra 300 Probability of frilure by agen 010 005 005 010 020 020 030 |Group Rs 050 It presents the failure pattern of 1000 high-intensity drying lamps used ma manufacturing process, Lamps cost Rs. 1:75 each. It is difficult to change a limp during a working day without disrupting production. A much lower per lamp sence cost resulls from group replacements scheduled on weekends when the production Ine ts idle. 816 OPERATIONS RESEARCH : TECHNIQUES Foy Vewceunig (1) Individual Reptocement Policy. Under this policy, According to the data given above, each time the entire bank of lsmps Ss replaced, the cost will be 1000 lamp x Re. 0-50 = Rs. 500 lamp. A group replacemect after 1 week would cost Rs. 500 plus the cost of individual replacements required during the week, 10% of the 1000 lamps will expire and need renewal at Rs. 3-00 per lamp. Then a one-week group replacement plan has a total cost of : Indnadual replacement + Group replacement = Cost/week 1000 x Rs 3x 010 + Rs. 500 = Rs. 800 A 2week plan has the same group cost of Rs. 500, but individual replacernents must be made for failures during 2 weeks for the origina! 1000 lamps phis renewals for the bumed-out lamps from the 100 replaced at the end of week 1 : Total cost of Replacements in Gap 2awecks group Replacements Replacements sweck 2 for replaced replacement or lamp tllng for Lang laing Asenpa teplaced cont at end poly = inueck1 inwrek2 inweek 1 + olweck 2 = Rs 3000x010 + Rs 3000%005 + Re 3000x010%010 + Re $00 - P5300 + Re 59 . Re. 30 Ra 500 Rs 980_yceint ORCIIONS ear Cost per week Ru 980/2 weeks = Ra-490, I coat for avery Were The meade of each replacement period Cont divided by the numberol weeks in the period "The tabulated calculations from Toble 8 : “cule 376 for a doweek replacement epee ne eae weekly TABLE EXPECTED COST OF GROUP REPACEMENT PERIODS This value: ts now the average ss We The expected life of 2 lamp is the sum of the products } ‘noon multplediigde aecetned RARE Eta Teck » O10 + 2 weeks x 0-05 +3 weeks 0-05 + 4 weeks * 0-20 Smoke Co enon 0 oy ea qn for the given condits ni ooh epee siven conditions, Exampl ole A a Sarge: honel te placem ‘bulbs fr i oe Es is now J " The a fatal scout ean be read Re. 1 by he basts of the i iter "Somonendatin 8 the management Months of use 52 @ bas Percent of bulbs failing by that month: 10 So tion. bs onde 9 ee on the basis of fallouring faea8 OPERATIONS RESEARCH TEOAbOUES Faq 1. Babs that fail during a month are replaced Just before the end tual percentage of failures during a month Ol the rene tube win the iar Is the same: as the expected. Percentage oP Mae a the month for that sub-population. ates gn be the probability that a light bulb, which was new i using he ith month of its hfe. This value Is the difference Teter ated, fa, alive at the beginning of Ith month and proportion alive at the eng 7 Pieper, Thus we have fh mons p, = 10/100 ~ 0.10 Pr = (25~ 10/100 - 015 py (0 -25)/100 = 025, py = (80-5010 ~ 9.29 and py = (100 = 80}/100 = 0-20. e sum of all probabilities can never be gre proteases beyond pul be taken t0 be aero) Greater than Unity, aa 4, Let Ng denote the number of original bulbs and f, represents the number replacements made at the end ‘of the Ith week. Then, we have a Ny = 500 x 6 = 3.000 fy = Number of bulbs being replaced by the end of first month. = (Number of bulbs replaced during first month) x (Probability that a bulb fails during first month of its = Nop) = 3000 x01 = 300 alate | Jy = Number of bulbs replaced by the end of second month = (Number of bulbs in the beginning) » (Probability that these bubs fails in second month}. + (Number of bulbs replaced in first month) x (Probability that these fad during second mcs fs = Nops + hia + for = 3000 « 0-25 + 300 0.15 + 480 «0-10 = 843 Jy = Noba + fips + hope + fap = 3000 x 0:30 + 300 x 0-25 + 480 x 0-15 + 843 x 0-1 = 1.131 fy = Nop + fips + fopy + Japa + fara | = 300 x 0-20 + 300 x 0-30 + 480 x 0-25 + 843 x 0-15 + 1131x010 = 1049 From above calculations, it is observed that the expected number of light be J, {aling each week increases till the 4th week and then starts decreasing. Ths | x! oscillate till the system acquires a steady state in which the proportion of hs saa och month Is reciprocal of their average life. The expected hile of each bot > given by : | | | | | = Nope + hip, = 300 * 0-15 + 300 x 0-10 = 480 5 E tp 21x010 422015 + 3x 0.25 4x 090 +5 x 0:20 = 335m Thus in the steady state, the average number of replacements (fallrel will Be N__ _ 3,000 mean We "3.45 = 896 bulbs/monthro 7 619 he cost of individual Nhe muda rrdcemert = Re BB 3 egos Re the age oy compare individual replacement policy with Total no, of bute foe ~The average cost is minimum it qguan ther over) ted Seen ee ot pra Example 8-11, Following mortality “erechen for 6 certain type of uses: Week 1 eae oF a % failing by the end of thesweek — - ae re There ore 1,000 fess ie oaat CEEe se juaes at fted peereaiteg ae al fuses at fixed tnt Solution. Let p, be the postion for use, fails during Then, the follow ebay 24 bubs as and when they fall, - pre the acho ohn aa x a Pe= the prety: of failure in P= the prob of falar in 2nd Ps will be zero, ‘ng the fifth week. ( as that fall duringOPERATIONS RESEARCH : TECHNIQUES, 620 {replacements made at the end of ; Lat f denote the number oF the Stes ca No Let 000 bulbs are new tn = 1000 x 0.05 = 50 =a | r000 x 0:10 + 80x 005 = 100426 = 268 —_ 100 # fy px 020 + 502010 + 102% 005. 249 fy = NoPi fp = Nope + fit fy = NoPs + f1P2 AP fae Nope ¢ fids #42Pt +hom . 1000 x 0-4 + 50x02 + 102% 0-10 + 210 x 0-05 = 430 fy = Noss Let f2Ps + fabs *fePi = 100 025+ 50x 0-40 + 1200-20 + 210 x 010+ 430. From the above failing each week Inc be shown that the value which the proportion of ft The expected life ‘of each fuse 005+ 2x O1+3% 0.2+4x 0445) pverage numberof tures = "ga = 270 fuses/wetke Since the replacement ‘of all 1,000 fuses simultaneous cons and the cost of individual replacement 15 Rs, 5, the cost of grou gghen in the following table : TABLE 814 COMPUTATION OF AVERAGE - Lipa ts 3, The table shows that the average minimum cheapest to have a group feplconan after every cost of individual replacement policy is Rs, 1,350 replacement after every second week is Rs. 1,005. F replocing all fuses at fixed intervals of thme whale to continue replacing burnt-out fuses as they fail | policy of replacing each fuse when it fails. 6-3, STAFF REPLACEMENT PROBLEMS So far we have discussed human beings working in an org copied (0 forsale, woane ested eee working in the tion. For this it is the service of staff in the organ ag