ABSTRACT

Several researches have been done to provide better alternative to the existing replacement models, but the research works did not adequately address the replacement problem for items that fail suddenly. Hence, a modified replacement model for items that fail suddenly has been proposed using the knowledge of probability of failure times as well as that of variable replacement cost. The modified cost functions for implementing both individual and group replacements were derived. The cost functions were minimized using the principle of classical optimization in order to find the age at which replacement of items would be appropriate. Furthermore, goodness-of-fit test was used to select appropriate probability distribution of failure times as well as that of replacement costs. Conditions under which the individual and group replacement policies should be adopted were derived. Based on the empirical study, we observed that individual replacement policy is better than group replacement policy in terms of cost minimization. Finally, the proposed replacement policy was recommended over the existing one, which attracts higher replacement costs.