Abstract
In recent years, equipment with lower operating costs has been appearing successively as a result of technological advances, and the need has increased for an effective replacement decision system in management. In order to design a practical decision system applicable to a dynamic situation with technological advances, we treat a replacement problem with a finite planning horizon. In such a situation, it is important to devise a policy using forecast and adaptive re-estimation for taking into consideration changes in circumstances. In this paper, we propose a method of determining an economical replacement times of equipment for a finite planning horizon using the Control Limit Policy, and clarify the sufficient condition that the control limit policy is optimal. We analyze a special case where cash flow functions are exponential, and discuss two case studies related to the investigation of a certain bolt manufacturing firm. Further, by comparing with Kusaka's results [4], we show that this study can be interpreted as an essential extension of the former. Finally, we present a method for dealing with changes in circumstances. The method can easily give not only the ordinary optimal policy, but also a new revised optimal policy even when the replacement time is altered for strategic or other reasons.
