Information sharing under different warranty policies with cost sharing in supply chains

Abstract

AbstractIn practice, it is found that a product warranty can be provided by either the supplier or the manufacturer. As supply chains are increasingly integrated today, warranty costs are usually shared between the supplier and the manufacturer. In this paper, we model two different warranty policies based on which party provides the warranty: manufacturer warranty and supplier warranty. Considering the demand uncertainty and demand forecast, we analyze the information sharing strategy under these two warranty policies. Our results show that the manufacturer has an incentive to share the demand forecast information under both warranty policies when the cost efficiency in providing a warranty is high, which is different from the existing literature on the incentive for demand information sharing in the supply chain. Moreover, we find that it will hurt the party who determines the warranty period but benefit the other party.