Evaluating two-dimensional warranty policies for remanufactured products

Abstract

The modern world is experiencing an unprecedented pace of technological change. The introduction of new technological products encourages consumers to trade in old products for new so that they can keep up with the latest in technology. One of the consequences of this rapid change in technology is that product life cycles are very short and there is an abundance of old technology products that need to be disposed of, but this is happening at a time when the earth of running out of natural resources and suitable landfill areas. Remanufactured products are very popular with consumers due to their appeal to offer latest technology with lower prices compared to brand new products. The quality of a remanufactured product induces hesitation for many consumers, in regards to its efficacy and reliability. Therefore, the users are unsure if remanufactured products will have the capacity to render the same expected performance as that of a new device. This uncertainty regarding a remanufactured product could lead the consumer to make a determination against its purchase. With such expansive consumer apprehension, remanufacturers often employ marketing strategies in attempts to provide affirmation about product durability. One stratagem that remanufacturers could employ to encourage customer security are product warranties. The aim of this paper is to study and scrutinize the impact that would be had by offering renewing/non-renewing warranties on remanufactured products. The Advanced Remanufacturing-To-Order (ARTO) system deliberated on in this study is a sort of product recovery system. A discrete-event simulation model was developed from the view of remanufacturer for remanufactured items sold with two-dimensional warranty, in which, an End-Of-Use product (EOUP) is subjected to preventive maintenance action when the remaining life of the product reaches a pre-specified value so that the remanufacturer’s expected profit can be maximized. Experiments were design using Taguchi’s Orthogonal Arrays to represent the full recovery system and observe its behavior under different experimental conditions. In order to assess the impact of warranty and preventive maintenance on remanufacturer total cost, pairwise t tests were carried out along with one-way analyses of variance (ANOVA) and Tukey pairwise comparisons test for each performance measure of the ARTO system.