Optimum lifecycle management of asset portfolios with non-monetary value realization

The economics of production systems depends on how expenses in terms of lifecycle costs for machines are balanced by revenues. Most classical models for optimizing lifecycle decisions are based on a profit maximization paradigm. However, the solutions are strongly dependent on how the technical performance of the machine is translated into monetary units. This is a critical issue because often it is not easy to monetarize non-ideal behavior of machines (e.g. How to monetarize the image damage of the company resulting from a major production outage?). In the present paper, we present a new perspective on the economics of production systems which is not based on a monetary (profit maximization) paradigm. Instead, we model a production system as an object that (a) needs investment, and (b) generates a value for the company, but this value can be expressed in arbitrary units. This is consistent with the approach of the new ISO standard 55’000. In such a framework, it is no more possible to base decision making on maximization of a single objective such as profit, as costs and value are measured in different units and cannot be added. However, many lifecycle decision problems can still be solved. In particular, we discuss typical lifecycle problems such as determining optimal lifetime or optimum maintenance levels. We show that, given a portfolio of machines, the optimum decisions for the single machines can be determined, with exception of a single global parameter that holds for the portfolio as a whole. For our approach, we combine approaches from economic utility theory and multidimensional optimization with lifecycle models of technical assets