An Operations Research Approach To The Equipment Replacement Problem ? Introduction

The mining industry is presently one of the most heavily capitalized industries in the U.S. (U.S. - Statistical Abstracts, 1979). U.S. sales of new mining equipment (not including environmental, preparation, or long distance transportation equipment) are projected to reach approximately $5 billion/year in 1980 (Frost and Sullivan, 1979). Of these new equipment sales approximately 30 to 40 percent of this equipment will be used to replace old equipment. Therefore, an increase of efficiency in the use of equipment replacement capital could have substantially positive effects for the U.S. mining industry. This is very critical in these times of restricted capital availability, double digit inflation, burdensome governmental regulation, and rising foreign competition in the mining industry. This paper examines the numerous factors that constitute the typical mine equipment replacement problem. A computerized, mathematical model is formulated to utilize historic cost and production information to predict equipment cost versus age for the existing and potential replacement machines. Another part of this computerized model determines the best equipment replacement strategy that accomplishes estimated production goals at a minimum discounted cost. This computerized model is an easily used, consistent method of determining the optimum replacement age for any equipment unit or fleet of equipment at a mining operation.