Non-equal-life asset replacement under evolving technology: A multi-cycle approach

Abstract

This paper studies the cost-minimizing serial asset replacement problem under changing operating and replacement costs. Technological improvements affect these costs in different ways, which leads to different duration of sequential replacement cycles of the same asset. Therefore, a firm should optimize a chain of consecutive asset replacements using available information about future costs. We offer a novel multi-cycle algorithm for making such replacement decisions and prove that it converges to the infinite-horizon solution when the number of cycles increases. Important qualitative properties of the obtained optimal non-equal-life replacement strategies are derived, and practical recommendations are discussed.

Acknowledgments

The authors are thankful to two anonymous reviewers and the Area Editor for valuable comments that essentially improved the clarity of the paper. Natali Hritonenko acknowledges support of PVAMU FIE and Dean Kelley. The paper is supported by the Ministry of Education and Science of Kazakhstan (AP05131784).

Notes

1 The authors are thankful to the Editor-in-Chief Sarah Ryan for bringing their attention to this matter.

Additional information

Funding

The paper is supported by the Ministry of Education and Science of Kazakhstan under Grant AP05131784.

Notes on contributors

Yuri Yatsenko

Dr. Yuri Yatsenko has published over 200 papers and eight books. He earned his MS and PhD from Kiev University and a Doctor of Science from the USSR Academy of Sciences. During his career, he has been a professor in five different countries and taught mathematics, statistics, information systems, and computer sciences in four languages. He also held senior analytic positions at international companies in USA and Canada. His areas of expertise include modeling and optimization of economic, industrial, and environmental processes, technological change, innovations, operations research, and computational methods.

Natali Hritonenko

Dr. Natali Hritonenko is an Associate Dean and Professor of Mathematics at Prairie View A&M University. Her research area is mathematical modeling and optimal control in operations research, economics, and environmental economics. She has been invited and traveled the world sharing her research results through numerous presentations and collaborating on ground-breaking projects with a diverse team of leading experts. During her prolific career, Dr. Hritonenko has authored seven books and well over 130 papers. Her books are used as textbooks and translated to other languages. She is also on the editorial board of nine international interdisciplinary journals.

Seilkhan Boranbayev

Dr. Seilkhan Narbutinovich Boranbayev is a Professor of Information Technologies at L.N. Gumilyov Eurasian National University (Kazakhstan). He published more than 300 scientific articles and 4 books in the field of design and development of information systems, mathematical and computer simulation. Dr Boranbayev was a principal investigator of fundamental research projects under the Ministry of Education and Science of the Republic of Kazakhstan and has 9 state copyright certificates on developed software.