Optimal Selection of Obsolescence Mitigation Strategies Using a Class of Bandit Models

31 Pages Posted: 6 Sep 2012

See all articles by U. Dinesh Kumar

U. Dinesh Kumar

Indian Institute of Management, Bangalore

Haritha Saranga

Indian Institute of Management (IIMB), Bangalore

Date Written: May 30, 2008

Abstract

Obsolescence of embedded parts is a serious concern for managers of complex systems where the design life of the system typically exceeds 20 years. Capital asset management teams have been exploring several strategies to mitigate risks associated with Diminishing Manufacturing Sources (DMS) and repeated life extensions of complex systems. Asset management cost and the performance of a system depend heavily on the obsolescence mitigation strategy chosen by the decision maker. We have developed mathematical models that can be used to calculate the impact of various obsolescence mitigation strategies on the Total Cost of Ownership (TCO) of a system. We have used classical multi-arm bandit (MAB), arm-acquiring bandit and restless bandit models to identify the best strategy for managing obsolescence in such instances wherein organizations have to deal with continuous technological evolution under uncertainty.

Keywords: arm-acquiring bandit model, Gittins index, Markov decision process, multi-arm bandit (MAB) model, obsolescence, restless bandits (RB), total cost of ownership

Suggested Citation

Kumar, U. Dinesh and Saranga, Haritha, Optimal Selection of Obsolescence Mitigation Strategies Using a Class of Bandit Models (May 30, 2008). IIM Bangalore Research Paper No. 272, Available at SSRN: https://ssrn.com/abstract=2141667 or http://dx.doi.org/10.2139/ssrn.2141667

U. Dinesh Kumar (Contact Author)

Indian Institute of Management, Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560 076
India

Haritha Saranga

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
54
Abstract Views
702
Rank
675,887
PlumX Metrics