SHIP REPLACEMENT AND PREDICTION OF ECONOMIC LIFE

In a foreword, the Authors mention that the immediate progenitor of this paper is an R.I.N.A. paper presented by the first-named Author in 1972, and give some reasons for the further study on which the present paper is based. The related topics of projecting the most economic life for a new ship, and deciding when best to replace an existing ship, are examined. Two analytical techniques--average annual benefit and dynamic programming--are explained and compared; dynamic programming is more versatile and more adaptable to changing economic and political conditions, but average annual benefit is a much simpler technique and has a practical use in economic-life projections. Applications of the Authors' proposed methods are illustrated with numerical examples, and include some sensitivity studies that show how various factors may lengthen or shorten a ship's economic life. Some information on computer programs suitable for the calculations is included. Much more work remains to be done before the shipowner can be given a package of techniques telling him how to plan a completely rational fleet-replacement schedule, and the most immediate need is to break away from the present assumption of one-for-one replacement. A number of embellishments that could, and often should, be incorporated in the Authors' computer programs are listed. These later studies lend support to the major conclusions of the 1972 paper, and those conclusions are again enumerated in the present paper. Order from: BSRA as No. 47,749.