Abstract
This paper focuses on analyzing the cost behavior of a free-repair warranty (FRW) policy with a preventive maintenance (PM) schedule for a complex product. We utilize a generalized Polya process to model the more general failure and repairs during the FRW coverage period. The expected cost function of the FRW with PMs is derived. We firstly prove that a unique optimal PM schedule exists for a FRW with a finite number of PMs, and then propose a search algorithm for computing the optimal number of PMs and their implementation times for a given FRW coverage period. A certain amount of numerical analysis is conducted to gain further insights into the FRW with PMs. Owing to the significant cost-saving advantages of scheduling PMs for the FRW, our study offers an important analytical tool for marketing managers in the design of more competitive and cost-effective warranty policies for complex and durable products.
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