Model for economic replacement time of mining production rigs including redundant rig costs

Abstract

Purpose – The purpose of this paper is to present a practical model to determine the economic replacement time (ERT) of production machines. The objective is to minimise the total cost of capital equipment, where total cost includes acquisition, operating, maintenance costs and costs related to the machine’s downtime. The costs related to the machine’s downtime are represented by the costs of using a redundant machine. Design/methodology/approach – In total, four years of cost data are collected. Data are analysed, practical optimisation model is developed and regression analysis is done to estimate the drilling rigs ERT. The artificial neural network (ANN) technique is used to identify the effect of factors influencing the ERT of the drilling rigs. Findings – The results show that the redundant rig cost has the largest impact on ERT, followed by acquisition, maintenance and operating costs. The study also finds that increasing redundant costs per hour have a negative effect on ERT, while decreases in other costs have a positive effect. Regression analysis shows a linear relationship between the cost factors and ERT. Practical implications – The proposed approach can be used by the decision maker in determining the ERT of production machines which used in mining industry. Originality/value – The research proposed in this paper provides and develops an optimisation model for ERT of mining machines. This research also identifies and explains the factors that have the largest impact on the production machine’s ERT. This model for estimating the ERT has never been studied on mining drilling rigs.