Equipment Replacement Analysis: A Literature Review and Directions for Future Research

Abstract

Replacing equipment is an important decision that nearly all entities must face, generally motivated by rising operating and maintenance costs of current assets or the technological advances of available assets in the market. The problem has been studied for nearly a century. In this article, we survey single and multiple asset solution approaches under a variety of settings, including technological change, variable utilization, tax, and various uncertainties. Furthermore, we illustrate a number of open problems that are worthy of future study.

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Notes on contributors

Joseph C. Hartman

Joseph C. Hartman is Dean of the James B. Francis College of Engineering at the University of Massachusetts Lowell. He received his B.S. in general engineering from the University of Illinois at Urbana–Champaign and M.S. and Ph.D. in industrial and systems engineering from the Georgia Institute of Technology. He previously served on the faculty at Lehigh University and the University of Florida and as Editor of The Engineering Economist.

Chin Hon Tan

Chin Hon Tan is an assistant professor in the Department of Industrial and Systems Engineering at the National University of Singapore. He received his M.S. (2009) and Ph.D. (2012) in industrial and systems engineering from the University of Florida and his B.Eng. (2005) in industrial and systems engineering from the National University of Singapore. His research interests include decision analysis, stochastic dynamic programming, and applied probability. He is a member of IIE and INFORMS.