SPARE ORDERING POLICY FOR REPLACEMENT UNDER THE REBATE WARRANTY

Abstract

In this study, from the user’s perspective, a spare ordering policy for replacement of a non-repairable product/one-unit system, which with finite useful lifetime limit under a rebate warranty, is developed. The spare unit for replacement is available only by an order and the lead-time for delivering that spare is random. By introducing the gain due to rebate warranty, and the costs due to ordering, shortage and holding, we derive the expected cost rate and cost effectiveness in the long run as a criterion of optimality, and seek the optimum ordering time by minimizing the cost rate or maximizing the cost effectiveness. We show that there exists a unique optimum solution under some mild conditions. Sensitivity analyses are also carried out through a numerical example.