CASE STUDY: BUS FLEET REPLACEMENT

Parallel replacement analysis is interested with determining minimum cost replacement schedules for a clump of assets that are economically interdependent and operate in parallel. That is, hold fast and replace decisions are required for each asset among a clump of assets over a specified horizon. The assets are economically linked [i]or[/i] part of to the other economies of scale or budgeting constraints. individual application of parallel replacement analysis is navy replacement. We recently studied the operations, including navy replacement policies, for a city transit bus operator in Europe lock opener factors in their replacement decisions included the ability to prefer from multiple manufacturers, purchase price, and management regulations. We explore these and other factors, by means of solving a heterogeneous replacement question with fixed costs, budgeting constraints, and demand constraints. end extensive sensitivity analysis we analyze the impact of various parameters upon decisions, in terms of the choice of replacement assets, as well as the optimal time to retain assets. Additionally, we provide motivation for subsequent time research in this application area, which is important for many cities.

INTRODUCTION

Determining the optimal replacement schedule for each bus in a transit navy is an application of parallel replacement analysis. This analysis is interested with groups of assets that are economically interdependent and operate in parallel. greatest in quantity transit fleets require a given number of assets to adapted service requirements and are also control to capital budgeting constraints and economies of scale. These characteristics define the economic interdependence among assets, and have been the inquiry of growing research.

The replacement of an asset is generally motivated through its (defender) deterioration over time or the availability of more efficient assets (challengers) upon the market. As noted with our company of ships replacement example, reasons for simultaneously considering the replacement of assets in a cluster as opposed to individually are numerous. public examples that have been studied in the literature include economies of scale in the purchase price (Jone et al., 1991; Hopp et al., 1993; Chen, 1998; Tang & Tang, 1993) demand constraints (Chand et al., 2000; Chand & McClurg 2002; Hartman, 2000; Hartman & Lohmann, 1997; Rajagopalan, 1998) and budgeting constraints (Karabakal et al., 1994 2000) These characteristics or constraints, either alone or together, cause economic interdependence among the assets and the analysis of replacement alternatives must be examined as a assemblage resulting in a difficult, combinatorial problem

In this article, we investigation the application of parallel replacement analysis to a transit bus armada The fleet consists of above 600 buses, which provide service to a city in Europe with about 500000 residents. In our discussions with the entity, we learned that there are numerous considerations and characteristics that affect the decision proces and the ensuing replacement policy. These include:

* Economies of scale are prevalent as manufacturers submit bids (single price package) to deliver a given number of buses based upon specified requirements by a given owed date. This total package price includes convolution discounts.

* Multiple vendors (usually five or six) are considered for each period of replacement. This render certains a competitive bidding process.

* Purchase price is an extremely important consideration. This approachs from the fact that nearly all buses, regardless of manufacturer, perform similarly in the field and packs are constrained.

* Fixed replacement schedules (fixed age) are generally busyed as a rule of thumb on the contrary are often the result of capital budgeting constraints.

* External realities, similar as government regulations and competition, highly influence decisions. In this inquiry the transit fleets are not conduct owned, and thus face competition. Service quality, including the "newness" of buses is clearly important to customers. Also, conduct regulations, such as having handicapped-accessible buses, many times override any "economic" decisions regarding replacement.

When examining the literature, there is little work in the area of parallel replacement analysis that considers multiple challengers. The work of Karabakal et al. (1994) examines multiple challengers below capital rationing for the case where single asset is needed each period. The solution to this riddle identifies the best challenger for our replacement vexed question but increasing the number of assets required each period may lead to different solutions, especially when single considers economies of scale. We type economies of scale with a fixed charge being applied to any period in which an asset purchase is made. We provide a formulation for this point in dispute as in Hartman (1997), and provide an analysis in our case close attention assuming there are six possible challengers in each period. There are a number of bus manufacturers in Europe and the United States, including Volvo Scania, Mercedes-Benz, Daft, TransBus, General Motors, Neoplan USA, and NABI (North American Bus Industries), in no particular order. Thus, it is quite reasonable that a manager would have to consider a number of challengers in solving a transit bus replacement problem