Economic Criteria for Optimizing the Assigned Service Life of Machinery and Equipment

Sergey A. Smolyak ()

Economics of Contemporary Russia, 2022, issue 1

Abstract: The machine is used in a continuous production process in the enterprise that is a market participant. During its use, it can be subject to random failure after which losses occur due to interruption of the process. After failure, the machine is decommissioned and disposed of. Over time, the failure rate increases. Under these conditions, it turns out to be beneficial for the enterprise to set an assigned service life for the machine, after which (if no failure has occurred) it must be disposed of. We solve the problem of optimizing the assigned service life. Usually, to solve this problem, various optimality criteria are used, for example, average costs per unit of time (including the time to eliminate the consequences of a failure), reliability indicators, or other indicators that do not fully reflect the commercial interests of the enterprise owning the machine. Using the principles and methods of asset valuation, we build a mathematical model that allows us to calculate the optimal assigned life of the machine and at the same time assess the market value of the work performed by it. At the same time, in this problem, the optimality criterion is the ratio of the expected discounted costs to the expected discounted volume of work performed by the machine (in units of operating time). Using this criterion, the market value of the enterprise owning the machine will be the highest. The proposed model allows us to estimate the market value of the serviceable machine knowing its age. We compare the proposed and alternative optimality criteria. We give an example in which machine failures have a Rayleigh distribution. The proposed general approach can be used both in solving other optimization problems of reliability theory and for practical valuation of some types of machinery and equipment.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ack:journl:y:2022:id:764

DOI: 10.33293/1609-1442-2022-1(96)-45-55

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