Strategic and Tactical Analyses for Optimal Replacement Policies

Flexibility is an important consideration when implementing an optimal policy for the maintenance and replacement of systems subject to stochastic deterioration. Repair and replacement policies are usually determined on the basis of expected costs; however, it is important to provide a means by which a given policy can be re-evaluated for a particular realization. In other words, when a machine fails, particular costs relevant at that time should be used to modify the policy if those costs vary from the expected values that were used in determining the original policy. In this paper we discuss a minimal repair/replacement problem to demonstrate the use of post-optimal analyses that are performed at the time of policy implementation.