Strategic Replacement Decisions

Replacement decisions are critical in most businesses, because assets are subject to deterioration or obsolescence with usage and time. In addition, technological improvement affects the replacement cycle of assets. In our research, we focus on a fleet replacement problem with a single- unit. The main problems of fleet replacement decisions are first, when we should replace existing assets with new assets, and second, how many assets to replace at once. To solve these problems, we introduce two policies for fleet replacement: group replacement and staggered replacement. To address these issues, we develop mathematical models and analyze results to find the preferable policy under certain conditions.