Quantifying the risk in age and block replacement policies

Quantifying the risk in age and block replacement policies

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Article ID: iaor20104839
Volume: 61
Issue: 7
Start Page Number: 1151
End Page Number: 1158
Publication Date: Jul 2010
Journal: Journal of the Operational Research Society
Authors: ,
Abstract:

Preventive maintenance policies have been studied in the literature without considering the risk due to the cost variability. In this paper, we consider the two most popular preventive replacement policies, namely, age and block replacement policies under long-run average cost and expected unit time cost criteria. To quantify the risk in the preventive maintenance policies, we use the long-run variance of the accumulated cost over a time interval. We numerically derive the Risk-sensitive preventive replacement policies and study the impact of the Risk-sensitive optimality criterion on the managerial decisions. We also examine the performance of the expected unit time cost criterion as an alternative to the traditional long-run average cost criterion.

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