Title: Evaluation of asset replacement strategies considering economic cycles: lessons from the machinery rental business

Authors: Andreas Größler; Enzo Bivona; Fuzhuang Li

Addresses: Institute for Management Research, Radboud University Nijmegen, 6500 HK Nijmegen, The Netherlands ' Department DEMS, University of Palermo, Via Ugo Antonio Amico 3, 90133 Palermo, Italy ' PriceWaterhouseCoopers, Room 107, No. 3 Building, 58 Shengxia Road, Pudong, Shanghai, China

Abstract: In businesses with heavy capital investments, the effective management of assets is crucial, in particular in the fleet rental business where assets are the major source of revenues. One important question in this regard concerns the replacement of used assets and the purchase of new assets. Thus, the objective of this study is to evaluate performance effects of asset replacement strategies. In order to maximise net cash flow of a rental company for construction machinery, a range of scenarios investigating the timing and nature of policies for replacing the fleet are analysed. Simulation findings are then discussed to generalise results beyond the insights for the case study company.

Keywords: asset management; replacement strategy; replacement policy; system dynamics; simulation; modelling; machinery rental industry; economic cycle; fleet rental; net cash flow; construction machinery.

DOI: 10.1504/IJMOM.2015.069241

International Journal of Modelling in Operations Management, 2015 Vol.5 No.1, pp.52 - 71

Received: 10 Jan 2015
Accepted: 17 Feb 2015

Published online: 05 May 2015 *

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