Machine life cycle with fixed operating and maintenance costs when considering customer loss

Due to the increasingly-competitive business environment, it has become essential that all available resources be used optimally. Physical resources including machines are essential to overall success. Using resources or machines efficiently and effectively is the main consideration of most investments. However, considering only resource or machine investments may cause low product quality while the quality is required by customers. Therefore, resource or machine investments and product quality should be trade-off. This paper aims to determine the resource or machine life cycle while considering both investment and product quality. Resource or machine investments include the cost itself, and operating and maintenance costs. This paper assumes fixed operating and maintenance costs. The product quality is measured by the loss to customer. In the case that customers are totally satisfied the product, the loss is zero. On the contrary, customers feel loss and that loss can be measured by the well-known quadratic form. The trade-off model is presented to determine life cycle of a resource or machine. Further, a numerical example is provided to illustrate the model. Finally, conclusion and discussion are given.