Imperfect maintenance policies for warranted products under stochastic performance degradation

Abstract

Both customers and manufacturers benefit from warranties that effectively guarantee products’ performance with reasonable price and cost. Reliability-oriented degradation analysis has boosted the accuracy of lifetime prediction in the past decades and prompted additional maintenance and warranty options to manufacturers. In this paper, we present a systematic framework that aims to optimize imperfect maintenance policies for warranted products subject to stochastic performance degradation. We propose a novel objective-oriented imperfect repair scheme, and consider two scenarios corresponding to different types of products/systems. In the first one, warranties are claimed by customers in a random manner driven by performance degradation, whereas in the second one, the manufacturer offers periodic inspection services to customers and implements imperfect repairs if necessary. In both scenarios, we derive critical closed-form results to facilitate computation and optimization, from which managerial insights are gleaned. We find that (i) the randomness in customers’ claiming behaviors leads to remarkably more conservative warranty policies in which repairs are suggested to be more substantial; and (ii) the variable objective repair level in the imperfect repair exercise can effectively reduce the total maintenance cost over a finite warranty period. Overall, this work will equip practitioners with quantitative tools to prescribe optimal maintenance policies for warranted degrading products in various practical scenarios.