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Individual Replacement and Group Replacement Individual Replacement Policy

This document discusses different approaches to replacement policies: 1. Individual replacement policy where items are replaced at a fixed time interval whether failed or not. The optimal time is when total replacement cost is minimum. 2. Group replacement policy where all items are replaced together at a fixed interval, with replacing failed items as needed. The best time minimizes average cost per unit time. 3. Replacement considers changes in monetary value over time and uses net present value to determine optimal replacement time.

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2K views

Individual Replacement and Group Replacement Individual Replacement Policy

This document discusses different approaches to replacement policies: 1. Individual replacement policy where items are replaced at a fixed time interval whether failed or not. The optimal time is when total replacement cost is minimum. 2. Group replacement policy where all items are replaced together at a fixed interval, with replacing failed items as needed. The best time minimizes average cost per unit time. 3. Replacement considers changes in monetary value over time and uses net present value to determine optimal replacement time.

Uploaded by

Suyog Dashpute
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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INDIVIDUAL REPLACEMENT AND GROUP

REPLACEMENT

Individual Replacement Policy


In this policy, a particular time 't' is fixed to replace the item whether it has failed
or not. It can be done when one knows that an item has been in service for a
particular period of time and has been used for that time period

Let f (t) - number of items surviving at time (t -1) n = Total number of items with
system under
consideration. The probability of failure of items between 't' and (t - 1) can be
found out by
P = ((t -1) - f (t))/n)
Let the service life time of an item be T and try number of items in a system which
need to be
replaced whenever any of these fails or reaches T.
F (t) = number of items surviving at T
F'(t) = 1 -f (t) number of items that have failed
O (t) = Total operating time
Cf = Cost of replacement after failure of item
CPM = Cost of preventive maintenance.,
Cost of replacement after failure of service time T =n x f '(t) X C1
Also cost of replacement for item replaced before failure = n [1 —1(T)] Cpm
= n + f '(T) c f + n [1 — f ' (T) Cpm
Hence we can replace an item when the total replacement cost given above is
minimum where
0 (t) = f (t) dt

Group Replacement Policy

Under this policy, all items are replaced at a fixed interval 't' irrespective of the fact
they have failed or not and at the same time keep replacing the items as and when
they fail. This policy is applicable to a case where a large number of identical low
cost items which are more and more likely to fail at a time. In such cases, i.e., like
the case of replacement of street lights, bulbs, it may be economical to replace all
items at fixed intervals.
Let n = total number of items in the system
N (t) = number of items that fail during time t
C (t) = Cost of group replacement after time t
C (t) / t = average cost per unit time
C g = Cost of group replacement
Cf = Cost of replacing one item on failure
C (t) =nCg
F (t) = Average cost per unit time =C(t)/ t=nCg +Cf(ni+n2+.........+nt _ 1 ) / t
We have to minimize average cost per unit time, so optimum group replacement
time would be that period which minimize this time.
It can be concluded that the best group replacement policy is that which makes
replacement at the end of 't'th period if the cost of individual replacement for the
same period is more than the average cost per unit time.

STAFF REPLACEMENT AND MORTALITY PROBLEMS

In real life situations such problems are generally faced by big organizations
having many interconnected departments. In some cases, there is a trend to change
the job because of certain reasons like promotion to higher scale and designation,
attraction of lucrative salary and some social or personal problems.

RECRUITMENT AND PROMOTION PROBLEMS

The principles of replacement may be applied to formulate some useful recruitment


and promotion polices for the staff working in an organisation. We assume the life
distribution for the service of staff in the organization is already known.
HR REPLACEMENT POLICY
All organizations face the problem of initial recruitment and filling up of vacancies
caused by promotions, transfer, employee quitting their jobs or retirement and
deaths. The principle of replacement used in industry for replacement of parts, etc,
can also be used for recruitment and promotion policies, which are laid down as
personnel policy of an organization. The assumption made in such case is that the
destination of manpower is already decided.
DIFFERENT APPROACHES FOR REPLACEMENT

1) Replacement of items, which deteriorate with time without considering the


change in money value:

Let C = Capital cost of the item,


S (t) = Scrap value of the item after t years of use,
0 (t) = Operating and maintenance cost of the equipment at time t,
n = number of years the item can be used,
TC (n) = Total cost of using the equipment for n years,

Time 't'in this case is a discrete variable.

2) Replacement policy of an equipment/item whose operating cost increases


with time and money value also changes with time:

In previous examples, we assumed that the money value does not change and
remains constant but it is well-known that as the equipment deteriorates and
operating costs keep increasing, the money value keeps decreasing with time.
Hence we must calculate the Net Present Value (NPV) of the money to be spent a
few years hence. Otherwise the resale value, the operating costs, which are to take
place in future, will not be realistic and management will not be able to take
optimal decisions.

Let,
c = Initial cost of item/equipment
oc = Operating cost
r = Rate of interest
A rupee invested at present will be equivalent to (1 + r) a year after (1 + r)2 two
years hence and (1 + r)n in n years’ time. It means that making a payment of one
rupee after n years is equivalent to paying (1 + r)" now. The quantity 1/(1 + r) is
called the present worth or present value of one rupee spent n years from now.

Steps Involved in Calculation of Replacement Policy When Time Value


Changes:

Step I: Find out the present value factor at the given rate and multiply it with the
operating/maintenance cost of the equipment/items for different years.

Step II: Work out the total cost by adding the cumulative present value to the
original cost for all the years.

Step III:Cumulate the discount factors.

Step IV: Divide the total cost by corresponding value of the cumulated discount
factor forevery year.

Step V:Find out the value of last column that exceeds the total cost.
Equipment/item will be replaced in the latest year.

3) Replacement policy for equipment/items that breaks down/fails suddenly:

As an equipment or item, which is made of a number of components ages with


time, it deteriorates in its functional efficiency and the performance standard are
reduced. However, in real life situation there are many such items whose
performance does not deteriorate with time but fail suddenly without any warning.
This can cause immense damage to the system or equipment and inconvenience to
the user

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