Cost-Effective Replacement Decision for the Transmission Unit of Locally Fabricated Palm NUT Digester
Abstract
This study sought to establish optimum techno-economic replacement policies for the transmission unit of locally-fabricated oil palm fruit digester for cost-effective operation over a planning horizon of sixteen years. Deterministic Dynamic programming models were used in the study. The companies whose records were most amenable to the model’s application were used as as cases for the study. The records were painstakingly collated and processed for deployment in the models. The depreciation, cost of operation and maintenance, and the Equivalent Uniform Annual Cost (EUAC) of the unit were evaluated. The equipment EUAC is evaluated over all the periods of the planning horizon. The period with the lowest EUAC is recommended by the model as the most cost-effective replacement period. The companies’ replacement practice was assessed for its conformity with the replacement policy predicted by the model in a kind auditing approach. The companies were shown to incur increased EUAC for retaining the transmission unit beyond the replacement age recommended by the models. Deployment of replacement models for machinery replacement decisions support can enhance an industry’s economic advantage in today’s competitive industrial environment.
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Introduction
Palm Oil is one of the commodities besides petroleum products that have contributed greatly to Nigerian economic survival, as Nigeria was the world’s largest producer of palm oil then (Okafor, 2007). There is great economic problem in Nigeria today, and a dire need of diversifying the economy (Okafor et al., 2010). Resuscitating the agricultural sector; the oil palm production sub-sector inclusive, is a welcome idea. During the era of palm oil production boom in Nigeria, crude technologies were deployed; with the traditional techniques dominating most of the production lines. Little maintenance cost was incurred with these technologies due to the associated minimal wear and breakdown. The growing world population and recent emphasis on renewable energy have led to increased demand on palm oil production and the need of advanced technologies for its production.
Modern oil milling today employs palm fruit digesting and mashed fruit oil-expressing machines, most of which have high wears and breakdown in their power transmission units and material-processing screws. While the digesting and oil pressing units of these machines are fabricated locally, their power transmission units which have gear transmission systems are imported. As a result, foreign exchange is incurred in the procurement of these gear transmission units. Studies on their maintenance and replacement costs dynamics will assist in profitable management of our local oil mills. Premature retirement of equipment results in underutilization and consequently waste of resources and poor productivity. On the other hand, retaining the equipment beyond the useful economic life leads to incurring the avoidable higher cost of running and maintaining the parts or machine. This has a negative effect on the overall productivity of the system. The optimum replacement plan or time of the palm fruit digesting and mashed fruit oil-expressing screw presses’ gear transmission units depends on the economic life of the units.
Conclusion
The company’s replacement activity was in tandem with the recommendations of the replacement policy given by the model for some of the years studied. Thus the keeping of the unit in the years 2000, 2001 and 2002 during the first transmission unit use period tallied with the models recommendations. However the failure to replace the unit in 2003, up till 2005 was contrary to the models recommendation of “Due for replacement”. If the company had replaced the unit in 2003, there would have been a savings of N322.00 EUAC in 2004, an additional savings of N528.00 in 2005 and an extra savings of N226.00 EUAC in 2006. Also during the second transmission unit use period the non-replacement of the unit in the years 2007, 2008 and 2009 was in tandem with the model’s recommendation of “Keep”. But in 2010 the continued retention of the unit in service when the model recommended “Due for replacement” led to the EUAC gaining an increase after reaching a minimum value. If the company had replaced the unit in 2010, it would have reaped a EUAC savings of N196.00 in 2011. Similarly the keeping of the unit in the years 2012 and 2013 during the third transmission unit use period was in tune with the model’s recommendations of “Keep”. The continued retention of the unit in 2014 and 2015, however was contrary to the models recommendation “due for replacement”. The company would have gained a EUAC saving of N173.33 in 2011, if the unit was replaced in 2010. Zvipore et al. (2015) reported revenue increase from DP-based replacement analysis of a gold mine conveyor belt via replacement age determination. In conclusion, the use of engineering economic models, including replacement models for machinery management decisions support can enhance an industry’s economic advantage in today’s competitive industrial environment.