Warranty cost analysis for nonrepairable services products

Abstract

Many service products are installed in a complex system that is operated only when the entire system is completed. The time from their installation to commissioning, called a dormant state in this article, may take several years for systems such as complete buildings or aircraft. Warranties for the products may cover the time starting from their installation to a certain time. Warranty cost on replacements for such products is different from normal products without any dormant state. This article analyses the replacement cost for nonrepairable services products from a manufacturer perspective. We consider four warranty policies, which include two types of warranty terms (i.e., nonrenewing or renewing) and two types of replacements (i.e., with preventive replacement or replacement only upon failures). Relationships between the failure patterns at the dormant state and at the operating state are also discussed. Numerical examples and sensitivity analysis are presented to demonstrate the applicability of the methodology described in this article.

Cost analysis for multi-component system with failure interaction under renewing free-replacement warranty

“…Detailed studies can be found in Sheu and Chien (2005), Bouguerra et al (2012), Park et al (2013), Shafiee and Chukova (2013), Xie and Liao (2013). Specifically, cost modeling under renewing free-replacement policy (RFRW) is extensively studied in literature (Yeh et al, 2005;Chien, 2008;Wu and Xie, 2008;Vahdani et al, 2011;Darghouth et al, 2012;Chien, 2012). Under the RFRW policy, a product failed within the warranty period is replaced by a new one with a full warranty.…”

“…The main reason is due to the need for an accurate estimation of warranty cost for those systems as the warranty cost could be very high. When a complex system is treated as a 'single-component' system or a 'black box', the inner structure information is ignored (Wu et al, 2008;Ye et al, 2013). It is desirable to consider a different warranty policy for multi-component system when failure of several units instead of one unit results in the warranty cost (Bai and Pham, 2006;Scarf and Majid, 2011).…”

Dynamic optimisation of price, warranty length and production rate

“…The design phase must incorporate marketing variables and the design and marketing decisions must be made jointly (Huang, Liu and Murthy 2007). The cost of a warranty program must be estimated precisely, and its effect on the firm's profitability must be studied (Ja, Kulkarni, Mitra and Patankar 2002;Kleyner and Sandborn 2008;Chattopadhyay and Rahman 2008;Wu and Xie 2008). Basically, the warranty length is determined by the cost of warranty, which involves considerations such as warranty type, warranty service mechanisms, product failure rates and price (Raham and Charttopadhyay 2006).…”

Production system with process quality control: modelling and application

“…Tsou and Chen (2005) developed a dynamic model for a defective production system with Poka-Yoke. Wu and Xie (2008) analysed the replacement cost for nonrepairable services products from a manufacturer perspective. Uthayakumar and Parvathi (2009) investigated a continuous review inventory model to reduce lead time, yield variability and setup cost simultaneously through capital investments.…”