Joint preventive maintenance and extended warranty strategy for leased unreliable equipment submitted to imperfect repair at failure

Abstract

This paper examines the maintenance policy and the length of the extended warranty for leased equipment from the lessor's perspective. When the equipment fails within the base and extended warranty periods, imperfect repairs are carried out with a given efficiency following a decreasing quasi-renewal process. To reduce the number of failures, the lessor performs imperfect periodic preventive maintenance (PM) actions restoring the equipment to the state ‘as good as new’ with probability p and keeping it at state ‘as bad as old’ with probability q. A mathematical model and a numerical algorithm are developed to jointly determine the optimal PM period T* and the optimal extended warranty period we* maximizing the lessor's expected total profit over a finite time horizon. A numerical example is presented to illustrate the use of the developed model.