Repair vs. Replace: A 10‑Year‑Old Grinder Case Study

Our repair‑or‑replace framework guides managers in deciding whether to fix or replace equipment. We apply it to a 10‑year‑old plastic re‑grinder, book value $26,000, with 80 months of service life remaining.

Repair Cost Breakdown

• Cost per breakdown
  • Direct repair expense (removal, disposal, replacement parts, installation): $4,533
  • Lost production: each outage lasted two days, costing the company $8,200 in net profit loss, including scrap and cleanup.
• One‑time inventory cost
  • Backup grinder blade (cost $3,240) kept in stock to meet the maintenance department’s two‑day turnaround SLA.
• Ongoing reliability
  • Each repair delivers 24 months of trouble‑free operation, but with a 1% production capacity reduction.

Across its remaining life, continual repairs would total $127,000, with the bulk driven by lost production.

Replacement Cost Breakdown

• Disposal and salvage
  • Decommissioning cost: $1,190
  • Salvage value: $12,000
  • Non‑cash write‑off of the old unit
• New unit acquisition and setup
  • Purchase and installation (including spares): $59,800
  • Lease rate: 0.4% per month
  • Research, installation, certification, and staff training: $12,300
• Downtime during commissioning
  • 12 days of total downtime
• Operational benefits
  • Capacity boost: 2% increase
  • Utility savings: $150 per month
  • Quality & return reduction: $1,350 per month
  • Reliability improvement: 15% higher
  • Labor reduction: 0.5 fewer operators needed
• Warranty coverage
  • 36‑month manufacturer warranty covers breakdowns and compensates for lost production during downtime, excluding scrap if preventive maintenance is verified in CMMS.
  • Post‑warranty: repair costs mirror those of the old grinder, but with a 15% longer time to failure due to higher reliability.

Accounting for salvage and all operational advantages, the net cash outlay for replacement is just $41,500.

The analysis shows that replacing the grinder would save more than $85,000 over the next 80 months. The key takeaway is that lost production often dominates the cost equation—a factor many managers overlook. If excess capacity allows repairs without impacting delivery, a fix may still be preferable. Ultimately, thorough cost calculations lead to the optimal decision for your facility.