In fact, in any system the efficacy (efficiency) of an item deteriorates with time. In such cases, either the old item should be replaced by a new item, or some kind of restorative action (maintenance) is necessary to restore the efficiency of the whole system.
The cost of maintenance depends upon a number of factors, and a stage comes at which the maintenance cost is so large that it is more profitable to replace the old item. Thus, there is a need to formulate the most effective replacement policy.
In this dynamic world, sometimes the replacement may also be necessary to modernize the system.
The purpose of this chapter is to show what replacement models look like.
Replacement models are concerned with the problem of replacement of machines, individuals, capital assets, etc. due to their deteriorating efficiency, failure, or breakdown.
It is evident that the study of replacement is a field of application rather than a method of analysis. Actually, it is concerned with methods of comparing alternative replacement policies.
The various types of replacement problems can be broadly classified in following categories: