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Optimizing capital investments under technological change and deterioration: A case study on MRI machine replacement

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  • Emmanuel des-Bordes
  • İ. Esra Büyüktahtakın

Abstract

We study the multiple style and type parallel asset replacement problem (MST-PRES), which determines an optimal policy for keeping or replacing a group of assets that operate in parallel under a limited budget. Operating assets generally suffer from deterioration, which results in high operation and maintenance (O&M) cost and decreased salvage value, and technological improvements make it possible for new assets to operate more efficiently at a lower cost. In order to address these issues, we formulate a multi-objective mixed-integer programming (MIP) model that minimizes fixed and variable costs of purchasing new assets, O&M cost, inventory cost, and penalty cost for unmet demand minus salvage values, while considering technological advances and deterioration as a gain and loss in capacity, respectively. We apply our model to a case study involving two different styles of assets: a full-body magnetic resonance imaging (MRI) machine and a smaller extremity magnetic resonance imaging (eMRI) machine. Each has two types: high-field and low-field. We perform computational experiments and analyses using key model parameters and illustrate optimal replacement strategies considering the impact of technological advances and deterioration. Results show that the proposed MIP model provides valuable insights and strategies for companies, decision makers, and government entities on the capital asset management.

Suggested Citation

  • Emmanuel des-Bordes & İ. Esra Büyüktahtakın, 2017. "Optimizing capital investments under technological change and deterioration: A case study on MRI machine replacement," The Engineering Economist, Taylor & Francis Journals, vol. 62(2), pages 105-131, April.
  • Handle: RePEc:taf:uteexx:v:62:y:2017:i:2:p:105-131
    DOI: 10.1080/0013791X.2015.1126775
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    Cited by:

    1. Zhang, Le & Gu, Weihua & Fu, Liangliang & Mei, Yu & Hu, Yaohua, 2021. "A two-stage heuristic approach for fleet management optimization under time-varying demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 147(C).
    2. Liu, Xinyang & Zheng, Zhuoyuan & Büyüktahtakın, İ. Esra & Zhou, Zhi & Wang, Pingfeng, 2021. "Battery asset management with cycle life prognosis," Reliability Engineering and System Safety, Elsevier, vol. 216(C).
    3. Shields, Brett A. & Seif, Javad & Yu, Andrew Junfang, 2019. "Parallel machine replacement with shipping decisions," International Journal of Production Economics, Elsevier, vol. 218(C), pages 62-71.

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