On the effect of downtime costs and budget constraint on preventive and replacement policies

This work proposes a general approach to study and improve the effectiveness of the system with respect to its expected life-cycle cost rate. The model we propose considers a production system which is protected against demand fluctuations and failure occurrences with elements like stock piles, line and equipment redundancy, and the use of alternative production methods. These design policies allow to keep or minimize the effect on the nominal throughput, while corrective measures are taken. The system is also subject to an aging process which depends on the frequency and quality of preventive actions. Making decisions is difficult because of discontinuities in intervention and downtime costs and the limited budget. We present a non-linear mixed integer formulation that minimizes the expected overall cost rate with respect to repair, overhaul and replacement times and the overhaul improvement factor proposed in the literature. The model is deterministic and considers minimal repairs and imperfect overhauls. We illustrate its application with a case based on a known benchmark example.