Estimating warranty and service costs from MTBF estimates

Abstract

What is the cost of warranty? What is the cost of service? What are the cost trade-offs between product reliability and sell price? In today's aggressive marketplace with shrinking profit margins and shorter product introduction times these questions are being asked earlier in the product design cycle. In many, if not most instances the information needed to derive the answer is net available. Compounding the problem are workplaces with reduced staffing, fewer resources and a driving emphasis to do more with less. In this environment the alternative to providing the exact answer is to provide reasonable or ballpark estimates that show the interaction of various costing elements and allow the critical items to be identified and addressed as needed, This document presents a simplified method of estimating product service/warranty costs as a function of some basic, though not always easily obtained inputs. The method utilizes existing field actual data of similar products for predicting service activity on new products. Rates and numbers presented are for computer equipment and related peripheral devices operating in benign or office-like environments, but the methodology may be applied to other types of equipment and environments with the appropriate adjustments. The focus of this presentation will be keep it simple and assumes the reader has a basic understanding of reliability and service terms and terminology. Costs derived in this presentation will be referred to as product service-costs and will be quantified on a per unit per year basis (the amount that would need to be added to the sell or service price of each unit to recover the costs of the ones that fail). Costs associated with 90 day, 180 day or other time intervals of warranty or service can easily be derived by the appropriate division. >