Abstract
This paper considers a modified block replacement policy in which a unit is replaced at failure during (0, T0) and at scheduled replacement time T. If a failure occurs in an interval (T0, T), then the unit remains as it is until T. The mean cost rate is obtained, using the results of renewal theory. The model with two variables is transformed into one variable and the optimum policy is discussed. An example shows how to compute the optimum T0* and T* when the failure time of the unit has a gamma distribution.

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