operation management

| December 8, 2015

Tires that fail in service result in signiï¬cantly higher replacement costs than those

replaced before failure. For an 18-wheeler (that is, a truck with 18 tires), failure on

the road costs $300, whereas all 18 tires can be replaced prior to failure at a cost

of $75 per tire. The probability of failure is given in the following table.

Number of Miles Probability of Failure

0–5,000 .05

5,001–10,000 .15

10,001–15,000 .20

15,001–20,000 .40

20,001–25,000 .20

If tires are replaced at multiples of 5,000 miles only, what is the optimal age

replacement policy?

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