Article ID: | iaor200397 |
Country: | United States |
Volume: | 31 |
Issue: | 5 |
Start Page Number: | 65 |
End Page Number: | 73 |
Publication Date: | Sep 2001 |
Journal: | Interfaces |
Authors: | Dietz Dennis C., Katz Paul A. |
Keywords: | production, inventory, computers |
We developed and implemented a model-based replacement process for a diverse fleet of vehicles at U S WEST, a major telecommunications company (since June 2000, Qwest Communications International). The model considers relevant age-dependent factors, including annual maintenance cost, opportunity cost of downtime, depreciation, and salvage value. It assigns a replacement score to each candidate vehicle based on age, type, estimated replacement cost, and estimated maintenance cost in the next year of operation. The model then rank-orders the vehicles by score and identifies them for replacement subject to a budget constraint on fleet capital expenditure. Through implementation of the model-based process, the company expects an annual benefit of more than $13 million.