Product warranty: modelling with 2D-renewal process

Abstract

The study of product warranty is of interest to manufacturers for several reasons. Paid claims are a cost of doing business and a liability incurred by the manufacturer at the time of sale. For these reasons, estimating and forecasting warranty expenses is of interest. Also, warranty data provides information about the durability of products in the field and, therefore, is of interest to engineers. Here we emphasise two-dimensional warranties, like automotive warranties, that guarantee free repairs subject to both age and mileage limits. We aim to evaluate the average warranty expenses under a two-dimensional non-renewing free replacement warranty policy using real warranty data. We derive a numerical procedure for the evaluation of the two-dimensional renewal function and use it for the warranty cost analysis. In addition, we test whether the available data can be considered as coming from a two-dimensional renewal process.