UNIT 6 – REPLACEMENT MODELS

INTRODUCTION:

The replacement problems deal with deal with the situation that arise when some components (men or
machinery) requires replacement because of reduced efficiency, or breakdown or complete failure. Such
decreased efficiency or complete failure may be either gradual or all of a sudden.

A model is a replica of a real or existing system. It demonstrates the interrelationships between various
decision variables in the system. Providing a path to analyze the system behaviour for improving its
performance should be the primary objective of a model. The mathematical model uses a set of equations,
establishing a relation between the decision variables, to describe the system behaviour.

The need for decision of replacement is raised in any organization both in case of men and machinery. From
the theory of probability, it is possible to guess the chance of failure at various stages.

OBJECTIVES OF REPLACEMENT:

The primary objective of replacement is to direct the organization towards profit maximization or cost
minimization. Deciding the replacement policy that determines the optimal replacement age of equipment,
instead of using with higher maintenance costs for long time, is the main objective of replacement problem.
For instance, in order to replace an:

• item whether to wait till its failure or replacing at an early age with higher cost.

• equipment whether to replace the inefficient equipment with a similar type of equipment or with
a modern one.

In case of high cost equipment, the decision is whether to replace it immediately or later.

FAILURE MECHANISMS OF EQUIPMENTS:

The term „failure‟ has a wider meaning in business than what it has in our daily life. Failures can be discussed
under two categories viz.,
Gradual Failures ( Items whose efficiency deteriorates with time)

• Sudden Failures ( Items that fail completely).

1. GRADUAL FAILURE:

The mechanism under this category is progressive. That is, as the life of an item increases, its efficiency
deteriorates, causing:

• Increased expenditure for operating costs

• Decreased equipments‟ productivity
• Decrease in the value of the equipment

Example: bearings, pistons, piston rings, „Automobile Tyres‟, mechanical systems like machines, machine
tools, flexible manufacturing equipment etc. fall under this category.

REPLACEMENT OF ITEMS WHICH DETERIORATE AND WHOSE MAINTENANCE COST INCREASES WITH
TIME (GRADUAL FAILURE):

Replacement of items that deteriorate with time will depend upon the value of money and the
corresponding associated costs.
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 Costs to be considered: Various costs that are to be included in this model are all those costs that depend
upon the choice or age of the equipment. In some special cases, certain costs need to be included in the
calculations. For example, in considering the optimum decisions of replacement for a particular machine,
the costs that do not change with the age of the equipment need not be considered. The costs to be
considered while calculating the optimum replacement period are:

(i) Capital Recovery Cost =Average First Cost, if rate of interest is zero percent.

(ii) Running cost = Average operating and maintenance cost (O&M cost).

The above associated costs can be expressed as average cost per period and the sum of the above two costs
can be considered as total cost.

Economic Life of Equipment / Justification of Replacement

2. SUDDEN FAILURE:

This type of failure is applicable to those items that do not deteriorate markedly with service, but which
ultimately fail after some period of using. For any particular type of equipment the period from installation
to failure is not equal but will follow some „frequency distribution which may be progressive, retrogressive,
or random in nature‟.

a) Progressive failures: In this mechanism, probability of failure increases as the life of equipment
increases. Examples include: electric light bulbs, automobile tubes etc.,

b) Retrogressive failures: Some equipment may prone to failure with high probability in the beginning
of their life, and as the time progresses the probability of failure falls down. i.e., the capability of the
equipment to survive in the beginning of life enhances its probable life. Industrial equipments with this type
of distribution of life span is exemplified by aircraft engines.

c) Random failures: Under this failure, constant probability of failure is associated with the equipment
that fails from random causes such as physical shocks, not related to age. In such a case, virtually all
equipments fail prior to their expected life. Example: Electronic components like transistors, semi conductor

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elements, glass made items, delicate or brittle items, perishable items like fruits and vegetables‟ have been
shown to fail at a rate independent of the age.

REPLACEMENT OF ITEMS THAT FAIL COMPLETELY AND SUDDENLY:

A system generally consists of a huge number of low-priced components that are increasingly liable to failure
with age. Electronic items like bulbs, resistors, tube lights etc., generally fail all of a sudden, instead of a
gradual deterioration. The sudden failure of the item results in complete breakdown of the system. The
system may contain a collection of such items or just an item like a single tube light. The costs of failure, in
such a case will be fairly more than the cost of the item itself. In addition, the value of the failed item is so
small that the cost of keeping records of individual ages cannot be justified. For example, a tube or a
condenser in an aircraft costs little, but the failure of such a low cost item may lead the airplane to crash.
Hence we use some replacement policy for such items which would minimize the possibility of complete
breakdown.

The following are the replacement policies, which are applicable for this situation.

(i) Individual replacement policy in which an item is replaced immediately after it fails.

(ii) Group replacement policy is concerned with those items that either work or fail completely. In this
policy, a decision is made as regard to at what equal intervals, all the items are to be replaced simultaneously
irrespective of whether they have failed or not, with a provision to replace the items individually, which fail
during the fixed group replacement period‟.

There is a trade-off between the individual replacement policy and the group replacement policy. Hence, for
a given problem, each of the replacement policies is evaluated and the most economical policy is selected
for implementation. The optimal period of replacement is determined by calculating the minimum total cost.
The total cost is calculated using: probability of failure at time „t‟, number of items failing during time „t‟,
cost of group replacement and the cost of individual replacement

INDIVIDUAL REPLACEMENT POLICY (MORTALITY THEOREM)

In this policy, „an equipment or item is to be replaced as soon as it fails. Mortality tables will be referred to
determine the life span of any equipment or the probability distribution of failure. To discuss such type of
replacement policy, the problem of human population is considered. No group of people ever existed under
the conditions.

a) that all deaths are immediately replaced by births, and

b) that there are no other entries or exits.

Nevertheless, the reason for stating the problem under these two assumptions is that the analysis becomes
more easy by keeping the virtual human population in mind. Later, such problems can also be translated into
industrial items, where death is equivalent to a part failure and birth is equivalent to new replacement. Thus,
industries also face a fairly common situation.

GROUP REPLACEMENT POLICY OF ITEMS THAT FAIL SUDDENLY AND COMPLETELY

The rate of replacement and total cost involved in group replacement is based on the following theorem.

Theorem:
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(a) “Group replacement should be made at the end of t th period if the cost of individual replacements
for the period t is greater than the average cost per period through the end of the period, t.

(b) “Group replacement is not advisable at the end of period t, if the cost of individual replacement at
the end of period t–1 is less than the average cost per period through the end of tth period”.

QUEUING THEORY

INTRODUCTION
It is a common phenomenon in everyday life to see a large number of persons waiting in front of a booking
counter in a railway station or in a theatre or in a ration shop to have some service carried out. This formation
of queue occurs whenever the present demand for a service exceeds the present capacity to provide the
necessary government, industry, schools, hospitals, etc. A decision regarding the amount of capacity to
provide must be made frequently in industry and other places. It is difficult to predict about an arrival and
the type of service required. If we provide too much service, it would involve unnecessary excessive costs.
On the other hand, if we do not provide enough service capacity, this will result in a long waiting line, which
proves costly. So we are interested in reaching an economic balance between the cost of service and the
cost associated with waiting for the service. Queuing theory or waiting line theory provides vital information
required for such a decision. For describing a waiting line situation queuing theory provides a number of
alternative mathematical models. The basic queuing system consists of two major components Customers
arriving at a queuing system wait in queue to get some service, or if the system is idle or empty, the arriving
customer may be serviced immediately. Once the service is over the customer leaves the system.
DEFINITION OF TERMS IN QUEUEING MODEL

Customer: The arriving unit that requires some service to be provided is called the customer. The customer
may represent people, machines, etc.

Server: A server is one who provides the arriving customer the necessary service. It may be persons in the
counter or machines, etc.

Waiting Line or Queue: The queue represents the number of customers waiting to be served. Normally the
queue does not include the customer being served.

Service Channel: This refers to the type of service provided. If we have one serving unit only, we have a single
channel model or single server model. If service involves more than one server, we have a multichannel
server model. We use the symbol k to denote the number of service channels.

Arrival Rate: This is the rate at which customers arrive to be serviced. This arrival rate may not be constant.
Hence it is treated as a random variable for which a certain probability distribution is to be assumed. The
assumption regarding the distribution of this value has an effect upon the mathematical model. It is
observed in general that in queuing theory arrival rate is randomly distributed according to the Poisson
distribution.

The mean value of the arrival rate is denoted by λ (lambda); the unit is usually customers/time period. There
are queues with other probability distributions also.

Service Rate: This is the rate at which the service is offered to the customers. This can be done by a single
server or sometimes by multiple servers, but this service rate refers to service offered by a single service
channel. This rate is also a random variable as the service to one customer may be different from the other.
Hence it is also assumed to follow in general, the Poisson distribution. The mean value of the service rate is
μ (mu); the unit is customers/time period. The distribution of this rate plays a role in the mathematical
model. Other distributions are also assumed.

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Infinite Queue: If the customers who arrive and form the queue are from a large population (eg.people
crowding at a cinema theatre, book in counter etc.) then the queue is referred to as infinite queuing model.
This assumption also has great influence in the mathematical formulation and its solution.

Finite Queue: If the customers arrive from a small number of population say less than 30, then this is treated
as a finite queue. This value also has an effect in the mathematical model formulation and its solution.
Priority: This refers to the method of deciding which customer will be served next. The most common
assumption is first come, first served (first in, first out). This assumption has also an effect in the derivation
of formulae used for analysis.

Expected Number in Queue: This is the average or mean number of customers waiting to be serviced. This
is denoted by Lq.

Expected Number in System: This is the average number of customers either waiting in the line and/or being
serviced, denoted by L.

Expected Time in Queue: This is the expected or mean time a customer waiting in line and/or being serviced,
denoted by Wq.

Expected Number in Nonempty Queue: This is the average or expected number of customers waiting in the
line excluding those times when the queue is empty. This figure can be arrived by counting and averaging
only nonzero values. It would be equivalent to L. This expected number in the nonempty queue is denoted
by Ln.

Expected Waiting Time For Nonempty Queue: This is the expected time a customer waits in line if he has to
wait at all. This value is the average of waiting times for all customers entering the queue when the serving
counter is filled. Customers entering the channel is empty needing not have to wait (zero waiting time) and
these values are not taken into account in arriving at the average. Wn denotes this value.

System Utilization or Traffic Intensity: This is the ratio between arrival and service rate denoted by ρ given
by ( λ / μ ).

Customer’s behaviour
1. Generally, it is assumed that the customers arrive into the system one by one. But in some cases,
customers may arrive in groups. Such arrival is called Bulk arrival.

2. If there is more than one queue, the customers from one queue may be tempted to join another
queue because of its smaller size. This behaviour of customers is known as jockeying.

3. If the queue length appears very large to a customer, he/she may not join the queue. This property
is known as Balking of customers.

4. Sometimes, a customer who is already in a queue will leave the queue in anticipation of longer
waiting line. This kind of departare is known as reneging.

Queuing theory for Management benefits

Applications
The queuing theory is used to analyze computer, telecommunication systems, traffic systems (traffic flue),
logistic and manufacturing systems.

Some examples :

-Where customers are involved such as restaurants, supermarket, airport,

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-useful in manufacturing units
-applicable for the problem of machine breakdown and repair
-applicable for the scheduling of jobs in production control
-provide solution of inventory control problems

Example – Hospital
• Patients arrive by ambulance or by their own accord
• One doctor is always on duty
• More and more patients seeks help longer waiting times ➢ Question: Should another MD
position be instated?

➢ Commercial Queuing Systems

➢ Commercial organizations serving external customers
➢ Ex. Dentist, bank, ATM, gas stations, plumber, garage …

➢ Transportation service systems

➢ Vehicles are customers or servers
➢ Ex. Vehicles waiting at toll stations and traffic lights, trucks or ships waiting to be loaded,
taxi cabs, fire engines, buses …

➢ Business-internal service systems

➢ Customers receiving service are internal to the organization providing the service
➢ Ex. Inspection stations, conveyor belts, computer support …

➢ Social service systems

➢ Ex. Judicial process, hospital, waiting lists for organ transplants or student dorm rooms …

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