A Mixed Optimization Technique for the Generalized Machine Replacement Problem

A mixed optimization technique for optimal machine replacement is presented which allows much more flexibility than previous models. Optimal purchase, maintenance and sale of a given machine between any two given points in time is treated as a subproblem, which one may choose to solve via control theory, dynamic programming, or practical engineering considerations. A control theory formulation is used in the paper as an illustration. These subproblem solutions are then incorporated into a Wagner-Whitin formulation for solution of the full problem. The technique is particularly useful for problems with such asymmetries as an existing initial machine or uneven technological change. A simple numerical example is solved in the Appendix.PDF Version: Sethi, S. P. and Morton, T.E., "A Mixed Optimization Technique for the Generalized Machine Replacement Problem," Management Sciences Research Report #241, GSIA, Carnegie-Mellon University, November 1971