Parallel machine replacement under horizon uncertainty

Abstract Construction projects usually get delayed for several time periods. When the planning horizon of a project is extended, projections for purchase and salvage of machinery within the planning horizon become inaccurate and less beneficial and often lead to unexpected costs. In this article, we formulate a parallel machine replacement (PMR) problem as a two-stage stochastic program with an uncertain planning horizon. We consider renting as an alternative to purchasing and maintaining the machinery. We show the application of the model through a case study in construction projects. Through numerical analysis, we derive managerial implications and show the value of the stochastic model.