Replacement Model

Question 1

arises when any one of the components of productive resources, such as machinery, building, and personnel, deteriorates due to time or usage.

Answer 1

Problem of replacement

Question 2

The main objective of the replacement model is to help organizations

Answer 2

Maximize profit and minimize cost

Question 3

This occurs as the life of the machine increases or due to continuous usage. Due to wear and tear of
components of the facility, its efficiency deteriorates. Ex: automobiles, machine tools, etc.

Answer 3

Gradual failure

Question 4

In this case, the items ultimately fail after a period of time. The life of the equipment cannot be predicted and is some sort of random variable

Answer 4

Sudden failure

Question 5

The probability of failure increases with the increase in the life of an item. The best example is electrical bulbs and computer components

Answer 5

Progressive failure

Question 6

Some items will have a higher probability of failure in the beginning of their life, and as the time passes,
chances of failure become less. That is, the ability of the item to survive in the initial period of life increases its expected life.

Answer 6

Retrogressive failure

Question 7

A constant probability of failure is associated with items that fail from
random causes such as physical shocks, not related to age. In such
cases, all items fail before aging has any effect. An example is vacuum
tubes.

Answer 7

Random failure

Question 8

Failures are more frequent in this stage, similar to how a baby needs time to adjust to its new environment.

Answer 8

Infant Stage or Early Failure Stage

Question 9

Failures may occur due to operational errors, heavy load, or voltage fluctuations, but these can be managed with repair and preventive maintenance.

Answer 9

Youth Stage or Random Failure Stage

Question 10

Frequent failures indicate that replacement of the machine or equipment may be necessary.

Answer 10

Old Age Stage or Wear Out Failures

Question 11

(4) Types of replacement problem

Answer 11

1. Replacement of Capital Equipment
2. Replacement of Items that Fail Completely
3. Replacememt of Human Beings in Organization (Staffing Problem)
4. Miscellaneous Problems

Question 12

It involves replacing components such as electric bulbs, transistors, and electronic components that fail suddenly and randomly.Replacement is conducted in anticipation of failure, a strategy known as preventive maintenance. Items are assumed to
have relatively constant efficiency until they fail. These models require knowledge of statistics and stochastic processes involving the probability.

Answer 12

Replacement of Items that Fail Completely

Question 13

This involves the process of replacing items such as machine tools,
transport, and other vehicles that experience a decrease in operating
efficiency due to aging or continuous usage. Replacement of capital equipment is essential for maintaining operational efficiency and minimizing costs over the lifecycle of the equipment.

Answer 13

Replacement of Capital Equipment

Question 14

This problem requires knowledge of life distribution for service of staff in
a system.

Answer 14

Replacement of Human Beings in the Organization (Staffing Problem)

Question 15

This involves replacement of existing units due to the availability of more effective and advanced technology. Replacement becomes necessary due to the research of new and more effective technology, making the old technology out of date.

Answer 15

Miscellaneous Problems

Question 16

Costs that depend on the item’s age or choice are considered in replacement decisions. Costs unaffected by the item’s age are disregarded.

Answer 16

Cost Consideration

Question 17

The key criterion in replacing items with deteriorating efficiency is the efficiency measurement.

Answer 17

Efficiency Measurement

Question 18

As time and usage increase, maintenance costs rise. When these costs become substantial, it’s economical to replace the item

Answer 18

Maintenance Cost

Question 19

When replacing an item, various alternatives are compared based on running and maintenance costs to select the optimal choice.

Answer 19

Alternative Choices

Question 20

Technique for Analysis

Answer 20

(a) Replace items with increasing maintenance costs over time, with constant money value.
(b) Replace items with increasing maintenance costs and changing money value over time.
(c) Use the concept of present value to compare alternative choices.

Question 21

REPLACEMENT OF ITEMS WHOSE MAINTENANCE COST INCREASES WITH TIME AND THE VALUE OF MONEY REMAINS SAME DURING THE PERIOD

Answer 21

C = PURCHASE COST OR CAPITAL COST OF THE ITEM,
S = SCRAP VALUE OR RESALE VALUE OF THE ITEM
T = MAINTENANCE OR RUNNING COST AT TIME
Y = TOTAL MAINTENANCE COST OR CUMULATIVE RUNNING COST DURING THE PERIO

Question 22

REPLACEMENT OF ITEMS WHOSE MAINTENANCE COSTS INCREASES WITH TIME AND VALUE OF MONEY ALSO CHANGES WITH TIME

Answer 22

Maintenance cost increases over time and the value of money changes over
time

Question 23

It is the current value of future expenses or income.

Answer 23

Present Value (PV)

Question 24

Is a Single payment present worth factor. It shows how much a future payment or expense is worth in today’s money. It’s always less than one (/-) because it reflects the fact that money is more valuable now than in the future due to factors like inflation and opportunity cost.

Answer 24

Present Worth Factor (PWF)

Question 25

Helps in determining how much needs to be saved or invested annually to reach a future financial goal.

Answer 25

Uniform Annual Series Present Worth Factor (UASPWF)

Question 26

The criterion:

Answer 26

(i) Do not replace the item if the operating cost of next period is less than the weighted average of previous costs,
(ii) Replace the item if operating costs of next period is greater than the weighted average of the previous costs

Question 27

There are certain items or systems or products, whose probability of failure increases with time. They may work with designed efficiency throughout their life and if they fail to act they fail suddenly. The nature of these items is they are costly to replace at the same time and their failure affect the functioning of entire system. It is evident failure of such items causes heavy losses to the organization. Such situations demand the formulation of a policy, which will help the organization to avoid losses

Answer 27

REPLACEMENT OF ITEMS THAT FAIL COMPLETELY AND SUDDENLY ARE EXPENSIVE TO BE REPLACED

Question 28

This policy states that replace the item soon after its failure. Here the cost of replacement will be somewhat greater as the item is to be purchased individually from the seller as and when it fails. From the time of failure to the replacement, the system remains idle

Answer 28

Individual Replacement Policy

Question 29

In this case, all the items, even they are in good working condition, are replaced at a stipulated period as calculated by the organization by using the group replacement policy. One thing we have to remember is that, in case any item fails, before the
calculated group replacement period, it is replaced individually immediately after failure. Hence this policy utilizes the strategy of both individual replacement and group replacement

Answer 29

Group replacement policy

Question 30

It states that a large population is subjected to a given mortality law for
a very long period of time. All deaths are immediately replaced by births and there are no other entries or exits. Here age distribution ultimately becomes stable and that the number of deaths per unit of time becomes constant, which is equal to the size of the total population divided by the mean age at death.

Answer 30

Mortality Theorem