A nonrenewable minimal-repair warranty policy with time-dependent costs

Abstract

Estimating warranty costs during the life cycle of a product is important to the manufacturer, who has to plan for creating a fund for warranty reserves. Replacement or repair costs associated with product-failure within the warranty period are drawn from this fund. This paper considers a policy where warranty is not renewed on product failure within the warranty period but the product is minimally repaired by the manufacturer. This implies that, on repair, the failure rate of the item remains the same as just prior to failure. Repair costs are assumed to depend on the product age. Such policies are suitable for complex and expensive products where repair typically involves a small part of the product. s-Expected warranty costs and amount of warranty reserves, based on a selected level of s-confidence, are derived. Applications of the results to various product market situations are considered. The results demonstrate how cost information can be used to decide and determine the warranty length.