Optimal Machine Maintenance and Replacement by Linear Programming and Enumeration

A dynamic programming model for deciding when optimally to maintain, rebuild or replace aging machines is presented. The model considers maintenance and rebuild costs, tax depreciation, opportunity costs due to lost production capacity, and a number of other factors. Linear programming and enumeration are employed to obtain optimal policies and to test the sensitivity of these optimal policies to the various factors. The model is applied to two actual problems involving barges and mining equipment.