An efficient formulation for an equipment replacement problem

Equipment replacement problems are normally solved using dynamic programming models. However, this approach has drawbacks such as ‘curse of dimensionality’. Some recent approaches use 0-1 integer programming models in an attempt to offset the drawbacks of dynamic programming. However, applicability of such models is restricted to smaller sized problems, because computer time taken becomes prohibitive as the problem size grows. In this paper, a formulation is proposed which can be used for very large sized problems, since the linear programming relaxation of this formulation always yields integer solution.