Determination of the warranty service method switch time of old generation products after new generation products launched

Abstract

PurposeThe purpose of this paper is to build a warranty cost model for consumer electronics with short lifecycle and frequently upgraded process in generations. Meanwhile, a new warranty service method of replacing the failed old generation (OG) products by new generation (NG) products is proposed to cease the service capability for the OG products from manufacturers’ viewpoint.Design/methodology/approachA model is built to find an optimal time to switch to the new warranty service method to minimize the warranty cost of the OG products. The inventory cost of spare parts of OG products for warranty, repair cost and manufacturing cost of NG products are taken into account. Meanwhile, a mixed strategy is studied by providing options to customers for replacing their failed OG products with NG products by paying a discounted price of the OG products. Moreover, numerical experiments are conducted to test the effects of different parameters on the optimal solutions.FindingsSolutions to the proposed model are discussed with analytic method and it is proved that the optimal solution exists in the considered situations. The mixed strategy considering the willingness of customers can result in the reduction of the warranty cost.Originality/valueThis paper analyzes the situation that more than one generations of products are in the marketplace simultaneously. Furthermore, this work makes a useful contribution for manufacturers to decrease their warranty cost by changing the service method, and provides the optimal warranty strategy for manufacturers considering the willingness of customers.