|2.

32 Industrial Safety
SOLVED EXAMPLES

Example 2,I Afirm is considering replacement ofan equipment, whose first cay
is Rs. 4,000 and the scrap value is negligible at the end of any year. Based on
experience, it was found that the maintenance cost is zero during the first year and'i
increases by Rs. 200 every year thereafter.
(a) When should the equipment be eplaced if i = 0%?
(6) When should the equipment be replaced if i =12%?
Solution: (a) When i= 0%. In this problem
() First cost = Rs. 4,000
(ii) Maintenance cost is Rs. 0 during the first year and it increases by
Rs. 200 every year thereafter.
This is summarized in column B of Table.

End of Maintenance Summation Average Average Average

Year cost at end of cost of first cost total cost
(n) of year maintenance maintenance if through
costs through replaced year given
year given at year
end given
B CIA 4000/A D+E
A B(Rs.) C(Rs.) D (Rs.) E (Rs.) F(Rs.)
0 0 4000.00 4000:00

2 200 200 100 2000.00 2100.00

3 400 600 200 1533.33

1333.33
4 600 1200 300 1000.00 1300.00

800 2000 400 800.00 1200.00

6 1000 3000 500 1166.67*

666.67
7 1200 4200 1171.43
600 571.43
*Economic life of the machine =6 years
Maintenance Engineering 2.33|

Column Csummarizes the summation of maintenance costs for each replacement

period. The value corresponding to any end of year in this column represents the
total maintenance cost of using the equipment till the end of that particular year.
First cost (FC) + Summation of maintenance cost
Average total cost =
Replacement period
Average first cost Average maintenance
=

|for the given period cost for the given period

Column F =Column E + Column D
The value corresponding to any end of year (n) in Column F represents the
average total cost of using the equipment till the end of that particular year.
For this problem, the average totalcost decreases till the end of year 6 and then it
increases. Therefore, the optimal replacement period is six years, i.e. economic life
of the equipment is six years.
(b) When interest rate, i = 12%. WWhen the interest rate is more than 0%, the steps
to be taken for getting the economic life are summarized with reference to
Table
Table Calculations to Determine Economic Life
(First cost = Rs. 4,000, Interest = 12%)
Present worthSummation of Present worth A/P, Annual
End Maintena P/E,
12% as of present worth of cumulative 12% (n) equivalent
of nce cost total cost
beginning of of maintenance
Year at the end n
year 1of maintenance cost & first through the
(n) of year maintenance costs through cost year given
costs the year given
D E+ Rs.4000 FG
(BC)
C D
(Rs.) E (Rs.) F (Rs.) G H (Rs.)
A B(Rs.) 0.00 4000.00 1.1200 4480.00
0.8929 0.00
159.44 4159.44 0.5917 2461.14
200 0.7972 159.44
2 4444.16 0.4163 1850.10
284.72 444.16
3 400 0.7118 1588.54
381.30 825.46 4825.46 0.3292
4 600 0.6355 1464.50
453.92 1279.38 S279.38 0.2774
5 800 0.5674 0.2432 1407.15
506.60 1785.98 5785.98
6 1000 0.5066 1386.65*
542.88 2328.86 6328.86 0.2191
7 1200 0.4524 6894.32 0.2013 1387.83
565.46 2894.32
1400 0,4039 0.1877 1402.36
576.96 3471.28 7471.28
9 1600 0.3606 1425.00
579.60 4050.88 8050.88 0.1770
10 1800 0.3220
*Bconomic life of the machine =7 years
2.34| Industrial Safety
The steps are summarized now:
1. Discount the maintenance costs to the beginning of year 1.
ColumnD =Column B
1
(1 +iy" Column B (P/F, i, n)
= Column B x Column C.
2. Find the summation of present worth of maintenance costs through the year
given (Column E = Column D).
3. Find Column F by adding the first cost of Rs. 4,000 to Column E.
4. Find the annual equivalent total cost through the years
given.
Column H = Column F x i(1+ iy"
(1+iy -1
ColumnF x (A/P, 12%, n)
= Column F 'x Column G
5. Identify the end of year for which the. annual equivalent total
cost is
minimum.
For this problem, the annual equivalent total cost is minimum at
the end 01
year 7. Therefore, the economic life of the equipment is seven
years.
2.6.3 Replacement ofof EExisting Asset with aNew Asset
In this section, the concept of comparison of replacement of an existing
asset wiu
a new asset is presented. In this analysis, the annual
eguivalent cost of eac
alternative should be computed first.
Then the alternative which has the least cost should be
selected as the bes
alternative. Before discussing details, some preliminary concepts which are essential
for this type of replacement analysis are presented.
Capital Recovery with Return
Consider the following data of a machine.
Let P = purchase price of the maçhine,
F= salvage value of the machine at the end of machine life,
Maintenance Engineering |2.35

n= life of the machine in years, and

i= interest rate, compounded annually
The corresponding cash flow diagramis shown in Fig

P%
0

Fig. 2.2. Cash flow diagram ofamachine

The equation for the annual equivalent amount for the above cash flow diagram is
AE () = (P-F) (AIP, i, n) +Fi
This equation represents the capital recovery with return.
2.6.4. Conceptof Challenger andDefender
If an existing equipment is considered for replacement with a new equipment,
then the existing equipment is known as the defender and the new equipment
is known as challenger.
Assume that an equipment has been purchased about three years back for Rs,
5,00,000 and it is considered for replacement with a new equipment. The
say., Rs.
supplier of the new equipment will take the old one for some money,
3,00,000.
equipment and it
This should be treated as the present value of the existing
analysis.
should be considered for all further economic
three years is now known
V The purchase value of the existing equipment before analysis,
considered for further
as sunk cost, and it should not be
years ago, a machine was purchased at a cost of Rs. 2, 00.000
Example 2.2 Two
useful for eight years. Its salvage value at the end of its life is Rs. 25,000, The
tobe
anual maintenance cost is Rs.
25, 000.
machine to
market value of the present machine is Rs. 1,20,000. Now, a new
The
available at Rs. I,50,000 to be useful for
cater to the need of the present machine is
|2.36| Industrial Safety
six years. Its annual maintenance cost is Rs. 14,000. The salvage value of the new
machine is Rs. 20,000.
Using an interest rate of 12%, find whether it is worth replacing the present
machine with the new machine.
Solution:
Alternative- 1: Present machine
Purchase price = Rs. 2,00,000
Present value (P) = Rs. 1,20,000
Salvage value (F) Rs. 25,000
Annual maintenance cost (A) = Rs. 25,000
Remaining life = 6 years
Interest rate = 12%
The cash flow diagram of the present machine is illustrated in Fig.
25,000

-2 -1 1 2 4 5 6

25,00025,000 25,000 25,000 25,000 25,000

1,20,000
2,00,000

Fig. 2.3. Cash flow diagramfor alternative 1

Annual maintenance cost for the preceding periods are not shown in this figure.
The annual equivalent cost is computed as;
AE (12%%) = (P- F)(AIP, 12%, 6) + FitA
[(1,20,000- 25,000) x(0.2432)) + [25,000 x 0.12] + 25,000
=

= Rs. 51,104
Alternative- 2: New machine
Purchase price (P) = Rs. 1,50,000
Salvage value (F) = Rs. 20,000
Maintenance Engineering 2.37

Annual maintenance cost (A) = Rs. 14,000

Life = 6 years
Interest rate = 12%
The cash flow diagram of the new machine is depicted in Fig.
20,000

1 2 3 4 6

14,000 14,000 14,000 14,000 14,000 14,000

1,50,000

Fig. 2.4. Cash flow diagram for alternative 2

The formula for the annual equivalent cost is
AE (12%) = (P- F) (AP, 12%, 6) + FitA
= [(1,50,000 - 20,000) x (0.2432)] + [20,000 x 0.12] + 14,00
Rs. 48,016
Since the annual equivalent cost of the new machine
is less than that of the
be replaced with the new
present machine, it is suggested that the present machine
machine.

2.6.5. Simple Probabilistic Modelfor lItems which

Fail Completely
Electronic items like transistors, resistors, tubelights,
bulbs, etc. could fail all of a
instead of gradual deterioration. The failure of the item may result in
sudden,
may contain a collection of such
complete breakdown of the system. The system
items or just one item, say a tubelight.
some replacement policy for- such items which would ayoid the
Therefore, use
possibility of a complete breakdown.
replacement policies which are applicable for this situation.
The following are the
this policy, an item is replaced
) Individual replacement policy. Under
immediately after its failure.
2.38| Industrial Safety
(ii) Group replacement policy. Under this policy, the following decision
made:

At what equal intervals are all the items to be replaced simultaneously with a
provision to replace the items individually which fail during a fixed group
replacement period?
There is a trade-off between the individual replacement policy and the group
replacement policy.Hence, for a given problem, each of the replacement policies is
evaluated and the most economical policy is selected for implementation. This ik
explained with two numerical problems.
Example 2.3 The failure rates of transistors in a computer are summarized in
Table.
Table: Failure Rates of Transistors in Computers
End of week 1 2 3 4 5 6 7

Probability of 0.07
failure to date 0.18 0.30 0.48 0.69 0.89 1.00

The cost of replacing an individual failed transistor is Rs. 9. If all the transistors
are replaced simultaneously, it would cost Rs. 3.00 per transistor. Any one of the
following two options can be followed to replace the transistors:
(a) Replace the. transistors individually when they fail (individual replacement
policy).
(b) Replace all the transistors simultaneously at fixed intervals and replace
individual transistors as they fail in service during the fixed interval (gro
replacement policy).
Find out the optimal replacement policy, i.e. individual
replacement poliey
group replacement policy. Ifgroup replacement policy is optimal, then find at w
equal intervals should all the transistors be replaced.
Solution:
Assume that there are 100 transistors in use.
Maintenance Engineering
|2.39
Let,
p, be the probability that a transistor which
was new when placed in position for
JIse. fails during the i week of its life, Hence.
P 0.07, P2 = 0.11, = 0.12,
P3 P, = 0.18,
Ps = 0.21, P6 = 0.20, P; 0.11
Since the sum of p,s is equal to 1 at the end of the
7th week, the transistors are
sure to fail during the seventh week.
Assume that
(a) transistors that fail during a week are replaced just
before the end of the
week, and
(b) the actual percentage of failures during a week for a sub-group of
transistors
with the same age is same as the expected percentage of failures during the
week for that sub-group of transistors.
Let
N, = the number of transistors replaced at the end of the ith week
No = number of transistors replaced at the end of the week 0 (or at the
beginning of the first week).
= 100

N, = number of transistors replaced at the end of the 1st week

=
No x p, =100 x0.07=7
N, =number of transistors replaced at the end of the 2nd week
(No xp,) + (N,xp,)
= (100 x 0.11) + (7x 0.07) = 12
Ng = (Nx p;) + (N xp,) t (N, xp)
= (100 x 0.12) + (7 x 0.11) + (12 x 0.07)
= 14

N = (No xp) + (N, xp;) + (N xp)+ (N3 xp)

0.07)
= (100x 0.18) + (7x0.12) +(12 x 0.11) +(14 x
= 21
 Industrial Safety
2.40
xp,) ++(N xp)
N, = (N, xp) + (N, xp) + (N, XP) +(N,
0.12) + (14 x 0.11) + (21 x 0.07)
= (100 x 0.21) + (7 x0.18) + (12x
= 27

= (No xP) + Nxp;) + (N, Xp) + (N, XP) + (N4 XP,) + (Ns xp,)
NG
0.12) +
= (100x 0.2) + (7 x 0.21) + (12 x 0.18) + (14 x
(21 x 0.11) + (27 x 0.07)
= 30
N, = (N xp) + N, Xp) + (N, xp)+ (N, Xp) + (N, XP}) +
(N,xp) + (N, xp,)
(100 x 0.11) + (7 x 0.2) + (12x 0.21)+ (14 x 0.18) + (21 x 0.12)
+(27 x0.11) + (30 x 0.07)
= 25

Calculation of individual replacement cost

7
Expected life of each transistor = ip,
i=1

= (1 x0.07) +(2 x0.11) +(3 x0.12) +(4 x0.18) +(5 x0.21)

+(6 x 0.2) + (7x0.11)
= 4.39 weeks
Average No. of failures 100
Week 4.3923 (approx.)

Therefore,
Cost of individual replacement
(No. of failures/week) x (Individual replacement cost/transistor)
= 23 x9= Rs. 207.

Determination of group replacement cost

Cost of transistor when replaced simultaneously = Rs. 3
Cost of transistor when replaced individually = Rs, 9
Maintenance Engineering 2.41
The costs of group replacement policy for several replacement periods are
summarized in Table.
Table Calculations of Cost for Preventive Maintenance
End of Cost of Cost of replacing transistors individually Total cost Average
week replacing during given replacement period C (Rs.) (B + C) cost/week
100
(D/A)
transistors
at a time
A B(Rs.) C(Rs.) D (Rs.) E (Rs.)
1 300 7x9=36 363 363.00
2 300 (7 + 12) x9= 171 471 235.50
3 300 (7+ 12 + 14) x 9= 297 597 199.00
4 300 (7+ 12 +t 14 + 21) x9= 486 786 196.50*
5 300 (7+ 12 + 14 +21 + 27) x 9 =729 1,029 205.80
6 300 (7+ 12 + 14+21 + 27 +30) x9 =999 1,299 216.50
7 300 (7+ 12 + 14 +21 + 27+ 30 + 25) x 9 = 1,224 1,524 217.71

* Indicates the minimumaverage cost/week

From Table it is clear that the average cost'week is minimum for the fourth week.
Hence, the group replacement period is four weeks.
Individual replacement cost/week = Rs. 207
Minimum group replacement cost/week = Rs. 196.50
Since the minimum group replacement cost/'week is less than the individual
replacement cost/week, the group replacement policy is the best, and hence all the
transistors should be replaced once in four weeks and the transistors which fail
during this four-week period are to be replaced individually.

2:7, SERVICE LIFE: OFEQUIPMENT

Meaning of service life

Service life is the duration throughout which a product is used economically. It is
manufactured products.
the measure of the durability of assets and
substrate and
During the service life, a coating has the ability to protect a
maintenance apart from
maintain its acceptable appearance, with no need for
cleaning.