When the cost of repairing an asset exceeds its value, you replace it. When the cost of repairs is lower than the value, you repair it. As a problem solver, you'll always be involved in half of the “repair versus. The cost of your efforts to find the problem and execute the right solution can tip the balance in favor of “repairing” or “replacing”.
Therefore, it is vital that you understand the economic aspects involved and their role in the process. In addition, the ability to competently advise your clients on this critical issue builds trust and leads to the type of lasting business relationships you want to cultivate. The problem solver as a manufacturer The greatest improvement in the productive powers of work and most of the skill, skill and judgment with which it is directed or applied anywhere seem to have been the effects of the division of labor, Adam Smith. All of the above risks can be mitigated.
Skill and experience can reduce the time needed to discover problems, aid in the execution of difficult repairs, and avoid wasting materials, such as spare parts. However, the above risks will still be present and may show their ugly heads at any time. Remediation involves many elements of uncertainty, which are similar to the risks faced by entrepreneurs in the business world. Entrepreneurs take risks with capital and their time, hoping to make a profit.
Problem solvers make similar bets with their repairs, chasing gains in the form of savings versus replacement cost. The need, reevaluated (upgrade and degradation) Many intricacies, what it has and the aspects to consider In conclusion, the dilemma of repairing or replacing is framed in the need that persists after a machine breaks down. This unmet need is paramount and your resources are limited, so be sure to compare the two routes before making a decision. For repair to be competitive, the cause must be quickly identified and the difficulties associated with repair must be skillfully avoided.
On the other hand, finding a suitable replacement has its own costs and dangers. The desire to save resources drives the search for the optimal solution; this goal-oriented action, carried out in the face of uncertainty, is the reason why the problem solver and the entrepreneur are soul mates. View all posts by Jason Maxham Notify me of new posts by email. This site uses Akismet to reduce spam.
Learn how your comment data is processed. People who used independent repair shops were more satisfied with the repairs than those who used the factory service, which is consistent with what we've discovered earlier. That was especially true when it came to large appliances and garden equipment. Fixing a broken machine with the intention of reselling it is conceptually no different from what any manufacturer does.
A pencil manufacturer assembles things like brass, cedar, facticia, glue, graphite, lacquer, pumice and wax. By combining and transforming these raw materials with labor, try to correctly anticipate public demand for writing instruments, hoping to sell pencils for a profit. Read “Me, Pencil” for an eloquent and revealing narrative of the coordination and complexity needed to produce this consumer staple that you've probably taken for granted. In that case, any market-based loss would only be theoretical.
Whatever the outcome, devoting resources to the solution could be justified solely in our own hierarchy of values. Once again, the market price is different from the personal value of a repair. For a given situation, each of these reference points could provide a very different answer, tilting the balance in the direction of repair or in the direction of replacement. Determining what the standard should be is going to be our first challenge, and we haven't even gotten to the mathematics and statistics behind the rule.
Using the original purchase price as the standard for the 50% rule seems to be the most problematic of all our options. If a machine is old, inflation will have reduced the value of the price you paid for it, making it appear smaller. Unfortunately, using this as a reference will give you more information about the wrong central bank policies and the degradation of your money over time (leading to a completely different discussion of “repair or replace”). While I recommend that introspection, it doesn't contribute to our goal of figuring out what to do with a broken machine.
In addition, it seems like a lot to ask the average consumer to draw up a table of inflation statistics and calculate constant dollars, linked to a reference year, as economists do. However, the people at the U.S. Bureau of Labor Statistics have made it very easy to do just that, with this handy web-based inflation calculator. But beyond the numbers, you need to stay in touch with your needs and the way a particular machine serves them.
Have those needs changed? What value does a gadget bring to your life or business? How does this compare to available alternatives (such as new models)? These considerations must be considered before making any repair or replacement calculation; otherwise, you'll be carried away by the “garbage in and out of the trash” nature of blindly following the results of a formula. I had no idea that the salvage value existed and that some money could be recovered by selling damaged or broken parts. I think this could help with the costs of repairing a truck. What makes it cheaper for the driver or fleet is important.
Yes, if the stakes are high, the research required to calculate the added value is more likely to justify the cost. However, when there is (apparently) little at stake, I still recommend that you take a brief moment to understand the role of a broken machine in your life or business. What benefits does it offer you? After all, if a machine doesn't really matter to you, why take any action? Okay, so your cheap calculator breaks. What do you use it for? Is it something that takes up space on your desk and that you're happy to get rid of (because nowadays all smartphones have a calculator app)? Or do you use it to achieve something important? I always strive to understand what a broken machine does for the person who wants to repair or replace it.
This context should guide the process, since even relatively inexpensive things can be critical avenues for important operations. But what if I told you that the parts are pending delivery and will take 2 weeks to arrive? Also, will it take another week to meet a technician's busy schedule to do the solution? Excellent article and very informative. It would have been nice to see a greater evaluation of subjective values when making such an important decision and evaluating the likelihood of failure when going to repair rather than repairing the vehicle. If there is a 30% chance that used parts will fail within a year, then that probability should be calculated in the cost of the repair.
Formulas take into account subjective attributes. That's what value functions and sensitivity analysis are for. Any applied differential calculus approach that incorporates joint value functions and the division of mean values can take their subjective values and quantify them. The end result is that you have a better comparison between repairing and replacing.
Utility must be quantified to make better decisions, whether with cards, marketing, finance, etc. My adorable 13-year-old VW bug (in perfect condition) was parked in front of my house overnight. A hit and run crashed into him at full speed. The damage to the rear was extensive and caused the car to roll up around the sidewalk.
I still don't know what the damage to the frame is. The end result is that you have a better comparison between repairing and replacing, so you can make a more informed decision regarding the uncertainties and risks involved in repairing. Repairs are restoration work for when something breaks, is damaged, or stops working. In fact, repairs were more likely to have been done incorrectly the first time and to wait at least two weeks for repair than people who didn't have those contracts.
Either way, it seems that the lower the costs involved, the less time and effort would be justified in calculating the added value of the repair. . .
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