A mean variance approach to the optimal machine maintenance and replacement problem

Charles S. Tapiero, Itzhak Venezia

Research output: Contribution to journalArticle

Abstract

This paper considers a simultaneous maintenance and replacement problem under uncertainty. The effects of maintenance and deterioration are assumed to have a probabilistic effect (of the Markovian type) on a machine’s salvage value. This leads to the definition of a non-stationary stochastic process of the machine’s salvage value whose mean and variance evolutions are found. These evolutions together with an expected discounted profit functional (as that given by Thompson) allows us to apply the tools of optimal control theory to determine a “certainty-equivalent” maintenance program and the optimum replacement date of the machine. A discussion of the uncertain effects of deterioration and maintenance and managers attitudes towards risk is included as well.

Original languageEnglish (US)
Pages (from-to)457-466
Number of pages10
JournalJournal of the Operational Research Society
Volume30
Issue number5
DOIs
StatePublished - May 1979

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ASJC Scopus subject areas

  • Management Information Systems
  • Strategy and Management
  • Management Science and Operations Research
  • Marketing

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