Introduction

The decision between equipment maintenance and replacement is a managerial activity and must be made more often to sustain production at minimum cost. Should we perform maintenance on this equipment or replace it? If we replace it, should we replace it with a brand-new high-efficiency unit or a conventional unit or a refurbished unit? Frequently, persons involved in making these decisions are not managers or engineers, but frontline supervisors and foremen.

The most common, significant effects of incorrect decisions are

• Negative impact on selected equipment performance

• Increased maintenance and operating costs

• Limitation in target feed processing/production/output

Rules for making these decisions are often vague and unscientific. Many times, they are based on rudimentary knowledge and, often, inappropriate rules of thumb.

How effective are the tools and guidelines and what has to be done to arrive at the optimal decision are topics that will be covered in this chapter. Even when the decision rules are well defined, there are frequent violations based on plant emergencies, meeting production targets, and other compelling situations.

Life-Cycle Costing for Effective Decision Making

The decision between equipment replacement and maintenance is based on costs a key financial parameter that determines the performance of the industry. Naturally, anyone would prefer the option that incurs the least cost, so that the profit margin is maximum. However, there are a number of costs that must be considered in evaluating various options related to equipment maintenance and replacement decisions.