CASE STUDY: BUS FLEET REPLACEMENT

Abstract

Parallel replacement analysis is concerned with determining minimum cost replacement schedules for a group of assets that are economically interdependent and operate in parallel. That is, keep and replace decisions are required for each asset among a group of assets over a specified horizon. The assets are economically linked through economies of scale or budgeting constraints. One application of parallel replacement analysis is fleet replacement. We recently studied the operations, including fleet replacement policies, for a city transit bus operator in Europe. Key factors in their replacement decisions included the ability to choose from multiple manufacturers, purchase price, and government regulations. We explore these and other factors, by solving a heterogeneous replacement problem with fixed costs, budgeting constraints, and demand constraints. Through extensive sensitivity analysis we analyze the impact of various parameters on decisions, in terms of the choice of replacement assets, as well as the optimal time to retain assets. Additionally, we provide motivation for future research in this application area, which is important for many cities.

ACKNOWLEDGMENTS

We would like to thank Mr. William Campbell, Director of Operations at Lothian Buses in Edinburgh, Scotland, for taking the time to share his expertise, which motivated this study. This research was sponsored in part by NSF grant DMI-9984891. This work was completed while on sabbatical at the University of Edinburgh.

Additional information

Notes on contributors

Pinar Keles

Pinar Keles is a Ph.D. student in the Department of Industrial and Systems Engineering at Lehigh University. She received her B.S. in Chemical Engineering from Bogazici University in Istanbul, Turkey in 2002 and her M.S. in Industrial Engineering from Lehigh University in 2004. Her research interests are in economic decision analysis and equipment replacement.

Joseph C. Hartman

Joseph C. Hartman is an Associate Professor in the Department of Industrial and Systems Engineering at Lehigh University where he holds the Soteria and George Kledaras Chair. He received his Ph.D. (1996) and M.S. (1994) in Industrial Engineering from the Georgia Institute of Technology and B.S. in General Engineering from the University of Illinois at Urbana-Champaign (1992). He is a member of ASEE, IIE, and INFORMS and currently serves as Editor of The Engineering Economist.