Managing Risk and Uncertainty in Machine Replacement Decisions Using Real Options Analysis and Monte Carlo Simulation
By:
References
- S. Bhandari, N. Chakpitak, K. Meksamoot and T. Chandarasupsang. “Knowledge engineering approach for power transformer asset management.” Journal of Engineering Science and Technology, vol. 7, pp. 73-88, 2012.
- B.R. Mehta and Y.J. Reddy. Industrial Process Automation Systems: Design and Implementation.Waltham, MA: Butterworth-Heinemann, Elsevier Inc., 2014.
- S. Wan. “Asset performance management for power grids.” Energy Procedia, vol. 143, pp. 611-616, 2017.
- M. Honda, T. Kishi and H. Yamamoto. “Study of asset management method for galvanized steel railway electrification infrastructure in JR-EAST.” Procedia CIRP, vol. 59, pp. 47-52, 2017.
- D. Kumar and I. Patnaikuni. “Why Simplified Asset Management is Vital for Organizational Growth.” International Journal of Construction Engineering and Management, vol. 1, pp. 14-19, 2012.
- L. Maring and M. Blauw. “Asset management to support urban land and subsurface management.” Science of the Total Environment, vol. 615, pp. 390-397, 2018.
- F. Yazdandoost and A. Izadi. “An asset management approach to optimize water meter replacement.” Environmental Modelling and Software, vol. 104, pp. 270-281, 2018.
- A. Orcesi, H. Chemineau, P. Lin, P. Van Gelder and N. Van Erp. “A risk analysis for asset management considering climate change.” Transportation Research Procedia, vol. 14, pp. 105-114, 2016.
- J. Hu, R. Harmsen, W. Crijns-Graus and E. “Worrell. Barriers to investment in utility-scale variable renewable electricity (VRE) generation projects.” Renewable Energy, vol. 121, pp. 730-744, 2018.
- T.W. Sloan. “Green renewal: incorporating environmental factors in equipment replacement decisions under technological change.” Journal of Cleaner Production, vol. 19, pp. 173-186, 2011.
- T. Nguyen, T. Yeung and B. Castanier. “Optimal maintenance and replacement decisions under technological change with consideration of spare parts inventories.” International Journal of Production Economics, vol. 143, pp. 472-477, 2013.
- S. Richardson, A. Kefford and M. Hodkiewicz. “Optimised asset replacement strategy in the presence of lead time uncertainty.” International Journal of Production Economics, vol. 141, pp. 659-667, 2013.
- S. Zheng and S. Chen. “Fleet replacement decisions under demand and fuel price uncertainties.” Transportation Research Part D: Transport and Environment, vol. 60, pp. 153-173, 2018.
- B. Glensk and R. Madlener. “Evaluating the enhanced flexibility of lignite-fired power plants: a real options analysis.” Energy Conversion and Management, vol. 177, pp. 737-749, 2017.
- W. Sullivan, E. Wicks and C. Koelling. Engineering Economy, London, UK: Pearson, 2013
- J. Zambujal-Oliveira and J. Duque. “Operational asset replacement strategy: a real options approach.” European Journal of Operational Research, vol. 210, pp. 318-325, 2011.
- F. Mardin and T. Arai. “A system dynamics model for replacement and overhaul policies on capital asset subject to technological change.” In Proceedings of the 29th International Conference of the System Dynamics Society,Washnigton, DC., pp. 211-225, 2011.
- A. Abdi and S. Taghipour. “Sustainable asset management: a repair-replacement decision model considering environmental impacts, maintenance quality, and risk.” Computers & Industrial Engineering, vol. 136, pp. 117-134, 2019.
- M. Reindorp and M. Fu. “Capital renewal as a real option.” European Journal of Operational Research,, vol. 214, pp. 109-117, 2011.
- S. Stutzman, B. Weiland, P. Preckel and M. Wetzstein. “Optimal replacement policies for an uncertain rejuvenated asset.” International Journal of Production Economics, vol. 185, pp. 21-33, 2017.
- M. Soleimani, M. Alizadeh and M. Moallem. “Economical replacement decision for induction motors in industry.” International Review of Automatic Control, vol. 5, pp. 240-246, 2018
- H. Abbaspour and A. Maghaminik. “Equipment replacement decision in mine based on decision tree algorithm,” in Proceedings of the 2016 Scientific Reports on Resource Conference, Freiberg, Germany, pp. 187-194, 2016.
- R. Shah, O. McMann and F. Borthwick. “Challenges and prospects of applying asset management principles to highway maintenance: a case study of the UK.” Transportation Research: Part A, vol. 97, pp. 231-243, 2016.
- V. Macián, B. Tormos and J. Riechi. “Time replacement optimization model: comparitive analysis of urban transport fleets using Monte Carlo Simulation.” Maintenance and Reliability, vol. 19, pp. 151-157, 2017.
- W. Xu and L. Cao. “Optimal tool replacement with product quality deterioration and random tool failure.” International Journal of Production Research, vol. 53, pp. 1736-1745, 2014
- D. Bandaly, L. Shanker and A. Satir. “Integrated financial and operational risk management of foreign exchange risk, input commodity price risk and demand uncertainty.” IFAC-PapersOnLine, vol. 51, pp. 957-962, 2018.
- A. Hao. “Uncertainty, risk aversion and risk management in agriculture.” Agriculture and Agricultural Science Procedia, vol. 1, pp. 152-156, 2010.
- K. Huang, L. Ye, L. Chen, Q. Wang, L. Dai, J. Zhou, et al. “Risk analysis of flood control reservoir operation considering multiple uncertainties.” Journal of Hydrology, vol. 565, pp. 672-684, 2018.
- M.H. Zwietering. “Risk assessment and risk management for safe foods: assessment needs inclusion of variability and uncertainty, management needs discrete decisions.” International Journal of Food Microbiology, vol. 213, pp. 118-123, 2015.
- L. Uusitalo, A. Lehikoinen, I. Helle and K. Myrberg. “An overview of methods to evaluate uncertainty of deterministic models in decision support.” Environmental Modelling & Software, vol. 63, pp. 24-34, 2015.
- F. Crundwell. Finance for Engineers: Evaluation and Funding of Capital Projects, London, UK: Springer-Verlag, 2008.
- S. Ward and C. Chapman. “Transforming project risk management into project uncertainty management.” International Journal of Project Management, vol. 21, pp. 97-105, 2001.
- A. Cagliano, S. Grimaldi and C. Rafele. “Choosing project risk management techniques: a theoretical framework.” Journal of Risk Research, vol. 18, pp. 232-248, 2014.
- G. Favato, G. Baio, A. Capone, A. Marcellusi and F. Saverio Mennini. “A novel method to value real options in health care: the case of a multicohort human papillomavirus vaccination strategy.” Clinical Therapeutics, vol. 35, pp. 904-914, 2013.
- H. Ghamlouch, M. Fouladirad and A. Grall. “The use of real option in condition-based maintenance scheduling for wind turbines with production and deterioration uncertainties.” Reliability Engineering & System Safety, vol. 188, pp. 614-623, 2019.
- G.T. Hult, C.W. Craighead and D.J. Ketchen. “Risk uncertainity and supply chain decisions: a real options perspective.” Desision Sciences, vol. 41, pp. 435-458, 2010.
- Y. Yatsenko and N. Hritonenko. “Machine replacement under evolving deterministic and stochastic costs.” International Journal of Production Economics, vol. 193, pp. 491-501, 2017.
- F.M. Muharam. “Assessing risk for strategy formulation in steel industry through Real Option Analysis.” Procedia Social and Behavioral Sciences, vol. 24, pp. 991-1002, 2011.
- V. Platon and A. Constantinescu. “Monte Carlo method in risk analysis for investment projects.” Procedia Economics and Finance, vol. 15, pp. 393-400, 2014.
- R.L. Harrison. “Introduction to Monte Carlo Simulation.” in AIP Conference Proceedings, vol. 1204, pp. 17-21, 2010.
- K. Madani and J. Lund. “A Monte-Carlo game theoretic approach for multi-criteria decision making under uncertainty.” Advances in Water Resources, vol. 34, pp. 607-616, 2011.
- A. Silva, F. Marins, E. Dias and J. Oliveira. “Modeling the uncertainty in response surface methodology through optimization and Monte Carlo Simulation: an application in stamping process.” Materials and Design, vol. 173, pp. 107-776, 2019.
- A. Banadaki, M. Tschopp and S. Patala. “An efficient Monte Carlo algorithm for determining the minimum energy structures of metallic grain boundaries,” Computational Materials Sceince, vol. 155, pp. 466-475, 2018.
- A.M. Momani and A.A. Ahmed. “Material handling equipment selection using hybrid Monte Carlo Simulation and Analytic Hierarchy Process.” World Academy of Science, Engineering and Technology, vol. 59, pp. 953-958, 2011.
- U. Arnold and Ö, Yildiz. “Economic risk analysis of decentralized renewable energy infrastructures – a Monte Carlo simulation approach.” Renewable Energy, vol. 77, pp. 227-239, 2015.
- M. Ataei, H. Shahsavany and R. Mikaeil. “Monte Carlo Analytic Hierarchy Process (MAHP) approach to selection of optimum mining method.” International Journal of Mining Science and Technology, vol. 23, pp. 573-578, 2013.
- C. Kaczor, S. Młynarski, M. Szkoda. “Verification of safety integrity level with the application of Monte Carlo simulation and reliability block diagrams.” Journal of Loss Prevention in the Process Industries, vol. 41, pp. 31-39, 2016.
- S. Yasuda. “Monte Carlo simulation for kinetic chemotaxis model: anapplication to the traveling population wave.” Journal of Computational Physics, vol. 55, pp. 56-72, 2016.
- M. Nasri, A. Metrane, H. Imad and A. Jamali. “A robust approach for solving a vehicle routing problem with time windows with uncertain service and travel times.” International Journal of Industrial Engineering Computations, vol. 11, pp. 1-16, 2020.
- A. Momani, T. Al-Hawari and R. Mousa. “Expanded Real Options Analysis for evaluating capacity expansion decisions under uncertainty in construction material industry.” South African Journal of Industrial Engineering, vol. 27, pp. 1-14, 2016.
- F. Crundwell. Finance for Engineers: Evaluation and Funding of Capital Projects, London, UK: Springer, 2008.
- D. Brenner, C. Weber, L. Lenz and E. Westkaemper. “Total tool cost of ownership indicator for holistical evaluations of improvement measures within the cutting tool life cycle.” Procedia CIRP, vol. 72, pp. 1404-1409, 2018.
- H. Baker and P. English. Capital budgeting valuation: financial analysis for today’s investment projects, Hoboken, NJ: John Wiely & Sons, 2011.
- P. Goodwin, G. Wright. Decision Analysis for Management Judgment, Chichester, UK: John Wiley & Sons Ltd., 2014.
- K. Chelst and S. Bodaily. “Structured risk management: filling a gap in decision analysis education.” Journal of The Operational Research Scociaty, vol. 51, pp. 1420-1432, 2000.
- S. Koh, A. Gunasekaran, J. Morris, R. Obayi and S. Ebrahimi. “Conceptualizing a circular framework of supply chain resource sustainability.” International Journal of Operations & Production Management, vol. 37, pp. 1520-1540, 2017.
- M. Zhang, D. Zhou and P. Zhou. “A Real Option model for renewable energy policy evaluation with application to solar PV power generation in china.” Renewable and Sustainable Energy Reviews, vol. 40, pp. 944-955, 2014.
- M. Elcheikh and M. Burrow. (2017, March). “Uncertainties in forecasting maintenance costs for asset management: application to an aging canal system.” ASCE-ASME Journal of Risk and Uncertainty in Engineering Systems, Part A: Civil Engineering. [online]. vol. 3, Available: https://ascelibrary.org/doi/10.1061/AJRUA6.0000890 [May 25, 2023].
Language: English
Page range: 326 - 338
Submitted on: Oct 1, 2023
Accepted on: Jul 1, 2024
Published on: Sep 5, 2024
Published by: STE Group sp. z.o.o.
In partnership with: Paradigm Publishing Services
Publication frequency: 4 times per year
Related subjects:
© 2024 Amer Momani, Samir Khrais, Ro’a Almahmood, published by STE Group sp. z.o.o.
This work is licensed under the Creative Commons Attribution 4.0 License.