Critical Equipment Replacement Scheduling

Generic Situation:

One of the great (if not the greatest) worries of a factory manager is the sudden, unexpected failure of a key piece of equipment.

Example:

Blivet Manufacturing Ltd. produces enamel bakeware. Its principal piece of equipment is the main stamping press. The owner, Karl Holter, is worried about a radical failure of the press, especially during the peak production Spring Season.

Every hour the press is down costs the company $200. An "unscheduled" failure results in 20 hours of down time to replace the press. A scheduled press replacement equals a downtime of 2 hours. Press replacement cost is $5000. Karl is thinking of introducing the strategy of letting a drill press run for a specified number of hours and then replacing it. Can this strategy minimize the expected cost per hour?

Profit Maximizing Solution:

Given the specifics of this case, the optimal solution was to replace the press every 54 hrs. This strategy yields an expected cost of $118,374, or around $118 per hour of operation.