Product Warranty Research Articles

Does the remanufactured product deserve the same warranty as the new one in a closed-loop supply chain?

We use a game-theoretic model to analyze the manufacturer's optimal warranty policy in a closed-loop supply chain. The new product is always associated with a premium warranty. The manufacturer decides on whether to provide the remanufactured product with the same premium warranty. The analytical results show that the optimal warranty policy depends heavily on the cost structure. However, the effect of the warranty cost is non-monotone. Interestingly, a higher cost of the premium warranty might induce the manufacturer to adopt the premium warranty policy. A mandatory same warranty regulation is all-around detrimental under certain conditions.

Design and Analysis of Accelerated Life Testing and its Application Under Rebate Warranty

The study deals with the advancement of accelerated life testing in the field of product warranty. The expected total cost and expected cost rate for age replacement is estimated under warranty policy using accelerated life testing (ALT) plans. Under constant stress, the lifetimes of the units are assumed to follow generalised exponential distribution. The estimation process is carried through maximum likelihood estimation method. Also, the Age Replacement Policy under Pro-rate Rebate Warranty is discussed. Finally, an application example is presented to illustrate the theoretical results.

Manufacturer warranty service outsourcing strategies in a dual‐channel supply chain

AbstractWarranty management for durable products has received increasing attention in recent years. In addition to conventionally keeping warranty in‐house, more manufacturers choose to outsource warranty service to agents. This paper explores outsourcing strategies for manufacturer warranty services in a dual‐channel supply chain by which the demand‐enhancing service can be undertaken by different supply chain parties. We show the results of three alternative outsourcing strategies for manufacturers whereby (a) the retailer undertakes the service, (b) a third party undertakes the service, and (c) both the retailer and a third party undertake the service simultaneously. According to Stackelberg game theory, we build a two‐echelon supply chain model and discuss the corresponding expressions for supply chain members' equilibrium decisions. Additionally, we compare the profits of each supply chain member and derive interesting managerial insights. When the base market size is relatively large, Scenario R helps the manufacturer and the retailer reach a “win‐win” situation.

Optimal preventive replacement policy for operating products with renewing free-replacement warranty

This paper investigates the optimal preventive replacement policy for products with random work under a renewing free-replacement warranty (RFRW). To model an imperfect maintenance action when the product fails, we consider that the failed product undergoes minimal repairs at minor failures and corrective replacements at catastrophic failures. Before catastrophic failures, the product is planned to replace preventively at age T or at the completion of a working time, whichever occurs first. For both warranted and non-warranted products, preventive replacement models from customer’s perspective are developed, and the optimal schedules of age-replacement that minimize the mean cost rate functions are derived. The effects of a product warranty on the optimal preventive replacement model are investigated analytically and computed numerically. It can be seen that the proposed model is a generalization of the previous works in maintenance theory.

Warranty Matching in a Consumer Electronics Closed-Loop Supply Chain

Problem definition : We examine a dynamic assignment problem faced by a large wireless service provider (WSP) that is a Fortune 100 company. This company manages two warranties: (i) a customer warranty that the WSP offers its customers and (ii) an original equipment manufacturer (OEM) warranty that OEMs offer the WSP. The WSP uses devices refurbished by the OEM as replacement devices, and hence their warranty operation is a closed-loop supply chain. Depending on the assignment the WSP uses, the customer and OEM warranties might become misaligned for customer-device pairs, potentially incurring a cost for the WSP. Academic/practical relevance : We identify, model, and analyze a new dynamic assignment problem that emerges in this setting called the warranty matching problem. We introduce a new class of policies, called farsighted policies, which can perform better than myopic policies. We also propose a new heuristic assignment policy, the sampling policy, which leads to a near-optimal assignment. Our model and results are motivated by a real-world problem, and our theory-guided assignment policies can be used in practice; we validate our results using data from our industrial partner. Methodology : We formulate the problem of dynamically assigning devices to customers as a discrete-time stochastic dynamic programming problem. Because this problem suffers from the curse of dimensionality, we propose and analyze a set of reasonable classes of assignment policies. Results : The performance metric that we use for a given assignment policy is the average time that a replacement device under a customer warranty is uncovered by an OEM warranty. We show that our assignment policies reduce the average uncovered time and the expected number of out-of-OEM-warranty returns by more than 75% in comparison with our industrial partner’s current assignment policy. We also provide distribution-free bounds for the performance of a myopic assignment policy and of random assignment, which is a proxy for the WSP’s current policy. Managerial implications : Our results indicate that, in closed-loop supply chains, being completely farsighted might be better than being completely myopic. Also, policies that are effective in balancing short-term and long-term costs can be simple and effective, as illustrated by our sampling policy. We describe how the performance of myopic and farsighted policies depend on the size and length of inventory buildup.

Drivers and barriers of consumer purchase intention of remanufactured mobile phones: a study on Indonesian consumers

Remanufacturing is widely practiced because it reduces landfill, saves energy, and conserves natural resources. Little effort is given to exploring the acceptance of remanufactured products, especially the short life-cycle ones. Indonesia, the fourth-largest mobile phone users, needs to tackle the vast WEEE deriving from obsolete mobile phones. This study investigates drivers and barriers of consumer purchase intention for remanufactured mobile phones. Thirteen respondents were interviewed, representing different age groups, genders, and social classes. The key drivers are the affordable price, upgraded specification, and product warranty, while the regulatory concern, trend concern, and obsolescence concern are the main barriers. Perceived quality and quality assurance can be both drivers and barriers, depending on the level. This study recommends remanufacturers to focus on providing upgraded specification at an affordable price and providing information about the remanufacturing process. This study also argues the urgency for the government to enforce rigorous regulation against counterfeit products.

Corporate Stakeholders, Corporate Valuation, and ESG

In an article published in 1987, we explained how corporate stakeholders, including customers, employees, suppliers, and distributors, influence financial policy and corporate behavior and why corporations have an incentive to treat these non-investor stakeholders fairly. At the heart of this explanation is the recognition that there are two fundamentally different classes of claims on a corporation. The first and most familiar are explicit contractual claims. These include employment contracts, bond indentures, product warranties, and the like. The second are implicit claims. Examples include fair treatment of employees, promise of continuing service to customers, and honest dealing with suppliers and distributors. Corporate stakeholders, all of whom have business relationships with the companies whose implicit claims they hold, value these implicit claims and are therefore prepared to pay for them. Corporate value is created by selling these implicit claims for more than it costs to honor them. More recently, a new class of non-investor stakeholders has arisen, related to Environmental, Social, and Governance (ESG) issues, but with no business relationships with the companies they are making demands on. Although many ESG advocates stress their role in creating shareholder value, they provide no explanation for how this value creation occurs. In this paper, we show that implicit claims provide a critical link that ties non-investor stakeholders and ESG to shareholder value. We show why many of the demands placed on corporations by ESG advocates, in the name of corporate social responsibility, interfere with the sale of implicit claims to corporate stakeholders and may thereby destroy shareholder value.

A stochastic simulation-optimization model for base-warranty and extended-warranty decision-making of under- and out-of-warranty products

In recent years, product warranties (including base-warranty and extended-warranty) have become an integral part of marketing strategy for most manufacturers as well as and a key determinant of purchasing decision for most customers. It is crucial for manufacturers or dealers who offer warranty to their customers to optimize decisions regarding price of products, durations of base-warranty and extended-warranty, price of extended-warranty, etc. On the other side, manufacturers must decide on a cost-effective imperfect maintenance strategy and spare part inventory policy for their under-warranty and out-of-warranty products. In order to solve these decision-making problems, this study proposes a novel stochastic simulation-based optimization (SBO) model with the objective of maximizing the manufacturer's profit. A metaheuristic Monte-Carlo simulation algorithm integrated with a dynamic programming approach is also presented to solve the model. A case study of vacuum cleaners is provided to illustrate the developed model and its solution procedure, and the simulation results are verified with real data. Finally, a sensitivity analysis is performed in order to evaluate the impact of key parameters on the optimal solution. Our analysis shows how different planning horizons can affect warranty-related decisions for both the manufacturers and customers, providing valuable insights to corporate decision-makers.

Pricing and warranty decisions in a two-period closed-loop supply chain

For a two-period closed-loop supply chain (CLSC) consisting of a manufacturer and a retailer, Stackelberg game analyses are conducted to examine pricing and warranty decisions under two warranty models depending on who offers warranty for new and remanufactured products and the corresponding benchmark models with a warranty for new products only. Next, we identify the conditions under which warranty for remanufactured products is offered and investigate how this warranty affects the CLSC operations. Subsequently, comparative studies are carried out to examine equilibrium decisions, profitability and consumer surplus of the CLSC between the two warranty models. Analytical results show that offering warranty for remanufactured products does not affect new product pricing in period 2, but influences the pricing of new products in period 1 and remanufactured products in period 2, thereby enhancing remanufacturing, individual and channel profitability, and consumer surplus. Compared to the retailer warranty for remanufactured products, the manufacturer warranty can attain a more equitable profit distribution. If the warranty cost advantage of the manufacturer (retailer) is significant relative to that of the retailer (the manufacturer), the manufacturer (retailer) arises as a natural choice to offer warranty for remanufactured products as this decision enhances both profitability and consumer surplus.

Cost analysis of a piece-wise renewing free replacement warranty policy

Nowadays, fierce competition and increasing customer requirements force manufacturers to continuously provide better after-sales services and supports. One such kind of after-sales services is product warranty which has been offered for almost all products in today’s market. In this paper, we study a new warranty policy, called piece-wise renewing free replacement warranty. Under this policy, the whole warranty period is divided into two sub-periods and once an item fails in a specific sub-period, it will be replaced by a new identical one and the warranty period is fully or partially renewed. The expected warranty cost and warranty cycle of this policy are derived from the manufacturer’s perspective. The proposed model is then modified by involving three sub-periods and a failure limit, respectively. In the latter scenario, when the number of item failures over a warranty cycle exceeds a pre-specified threshold, the manufacturer has to refund the item’s purchase price, and consequently the warranty ceases. A real-world case study is presented using warranty data of a battery manufacturer. It is found that for a given warranty period, the piece-wise renewing free replacement policy has a better performance than traditional fully renewing policy, in terms of expected warranty cost, warranty cycle, and cost rate.

Value Driven Design Revisited: Emerging Modelling Concepts and Applications

AbstractExtended product warranties, leasing, and pay-per-use schemes are few examples of how manufacturing companies are shifting their focus from selling products to offering “solutions”, combining products and services to maximise customer value. The idea of optimising a system towards the best ‘value’ is both “intuitive and sensible”, and processes such as Value Driven Design (VDD), have been proposed to supplement traditional engineering design methodologies. Yet, value-driven initiatives struggle to communicate their benefits and to demonstrate how value models can solve actual problems. The aim of this paper is to shed light on the evolution of the VDD toolbox, mapping research clusters, applications and case studies from the perspective of how much (and how well) recent contributions have answered the five top-level questions of the VDD research agenda published in 2012. The results of the systematic literature review reveal the emergence of innovative modelling constructs, methods, and tools that help VDD in taking a leap forward in supporting organizations and teams in achieving the long-sought objective of designing for 'value'.

Review: Soil compaction and controlled traffic farming in arable and grass cropping systems

There is both circumstantial and direct evidence which demonstrates the significant productivity and sustainability benefits associated with adoption of controlled traffic farming (CTF). These benefits may be fully realised when CTF is jointly practiced with no-tillage and assisted by the range of precision agriculture (PA) technologies available. Important contributing factors are those associated with improved trafficability and timeliness of field operations. Adoption of CTF is therefore encouraged as a technically and economically viable option to improve productivity and resource-use efficiency in arable and grass cropping systems. Studies on the economics of CTF consistently show that it is a profitable technological innovation for both grassland and arable land-use. Despite these benefits, global adoption of CTF is still relatively low, with the exception of Australia where approximately 30% of the grain production systems are managed under CTF. The main barriers for adoption of CTF have been equipment incompatibilities and the need to modify machinery to suit a specific system design, often at the own farmers’ risk of loss of product warranty. Other barriers include reliance on contracting operations, land tenure systems, and road transport regulations. However, some of the barriers to adoption can be overcome with forward planning when conversion to CTF is built into the machinery replacement programme, and organisations such as ACTFA in Australia and CTF Europe Ltd. in Central and Northern Europe have developed suitable schemes to assist farmers in such a process.

A note on optimizing practical product warranty via linear pricing

ABSTRACTThis note focuses on the problem of determining the optimal price and coverage period for warranted products from the manufacturer’s perspective. The goal is to maximize the total profit for a planning period for the case where the demand for the product depends on the warranty coverage period and selling price. Since warranty period and selling price are positively correlated in a complex way under the optimality condition, we propose a simple rule of ‘linearly pricing warranty period’ to help practitioners to price the product with warranty to maximize the total profit. The assumption that the selling price is a linear function of the warranty period (warranty-based linear pricing) has been made in the literature. However, its effect on the manufacturer’s profit has never been thoroughly investigated. We find that under some reasonable condition, this warranty-based linear pricing rule not only provides an easy way to price the product under a warranty with an appropriate coverage period in practice but also generates almost the maximum profit and capture more market share for the manufacturer. In addition, some managerial insights have been gained for practitioners in designing more competitive warranty and price policy.

Protecting brands from product failure using extended warranties

Purpose Product failures can lead to customer dissatisfaction, negative brand attitudes and a loss of brand equity. The purpose of this paper is to investigate whether extended warranties offer a mechanism to mitigate the negative effects of product failure and the mediating role of positive and negative self-directed emotions. Design/methodology/approach The hypotheses are tested using two 2 × 2 between-subjects experiments with product failure and warranty purchase as the two factors, attitude toward the brand as the dependent variable, positive and negative self-directed emotions as mediating variables and attitude toward warranties as a covariate. Findings It is found that the decline in attitude toward the brand due to product failure is greater among customers purchasing an extended warranty, than among those who do not. Moreover, positive and negative self-directed emotions mediate this relationship. Originality/value Manufacturers are for the most part not involved in distribution or administration of extended warranties, which are mainly sold through retailers and administered by companies that specialize in extended warranties. The study findings indicate that contrary to industry practice, consumer-durable manufacturers should consider more active management and promotion of extended warranties to protect their brand’s equity from the negative effects of product failure.

Technoeconomic analysis of floating solar field for 1 GWh of electricity generation

This paper presents a technoeconomic evaluation of 1 GWh electricity generation using a floating solar PV (FSPV) system implemented on the Bakun Lake. Five PV brands are evaluated for 2×2, 3×3, 4×4 and 5×5 layout designs. The major factors used for the evaluations: total capital cost, total platform area, stability or percentage weight distribution, product warranty and PV efficiency. In total, 20 design scenarios are evaluated using a heuristic-based optimization approach to determine the best design. An optimization considering the total cost, coverage area and stability suggests that the 3x3 layout using Astronergy brand is the best design for the FSPV. However, a long-term analysis considering product warranty and efficiency reveals that the Panasonic brand is the most cost-effective after 40 years of operation.

Two-dimensional warranty period optimization considering the trade-off between warranty cost and boosted demand

Product warranty in the market has a significant role in both protection and promotion. The manufacturer faces a problem of optimizing the warranty period considering a trade-off between the warranty cost and marketing competition. Meanwhile, for a two-dimensional (2D) warranty, customers with different usage rates have various perceptions on warranty period. Based on the relationships between nominal usage rate and customer’s usage rates, three different cases of designed 2D warranty period are discussed. Considering the variations in customers perceptions, a demand function based on attractiveness index is proposed to describe the boosted sales volume. Meanwhile, the expected warranty cost of 2D warranty based on a bivariate approach is derived when the product failures are minimally repaired. A profit model is developed to estimate the manufacturer’s expected profit of providing a longer warranty period. The optimal extension of 2D base warranty period is obtained by maximizing the manufacturer’s expected profit. Numerical examples in the automobile market are also conducted to validate the proposed model.

The Impact of Warranty Efficiency of Remanufactured Products on Production Decisions and Green Growth Performance in Closed-Loop Supply Chain: Perspective of Consumer Behavior

Consumers cannot fully assess the quality of remanufactured products prior to purchase. To reduce consumer risk, closed-loop supply chains adopt a warranty strategy to enhance perceived value among customers and stimulate green growth. Based on Stackelberg game theory and considering consumers’ low-carbon and remanufactured product preferences, this paper aims to explore the decision-making efficiency of closed-loop supply chains with warranty services. The results of the study show that consumers’ confidence in purchasing remanufactured products has increased the demand for new products and remanufactured products, in turn also increasing the interest of the member companies of the supply chain, and stimulating the realization of the potential value of remanufacturing, which is conducive to green growth. When a remanufactured product warranty period meets certain conditions, the member companies of the supply chain can obtain optimal profit. The optimal warranty entity selection of a closed-loop supply chain with a warranty service depends on the warranty efficiency of each entity, thus making it necessary to examine the products of each warranty party.

AFTER SALES SERVICE, CUSTOMER SATISFACTION, AND LOYALTY IN TELECOM SECTOR

This study aims to examine the relationships between after-sales service, customer satisfaction, and loyalty. Moreover, this study also explains how after-sales services such as delivery, installation, product warranty, telephone/online supports, up gradation, and complaint influence customer loyalty with the mediating role of customer satisfaction. Online data were collected using a convenience sampling technique from 204 respondents who were currently using the Internet (i.e., 3G, 4G devices or fixed broadband) in Pakistan. The online-based questionnaire was implemented a five-point Likert scale with 38 items. Structural equation modeling (SEM) was performed to test the hypotheses. The results show (a) after-sales service has a significant influence on customer loyalty, (b) after-sales services effect customer satisfaction positively, (c) customer satisfaction has a direct and positive impact on loyalty, and (d) satisfaction partially mediates between after-sales service and loyalty. This study explains how service sector organizations maintain a profitable long-term relationship with customers, and how to get customer satisfaction and loyalty. In addition, this research may contribute to the literature that there exists a positive relationship between after-sales service, satisfaction, and loyalty which could apply to other service industries as well.

Warranty Matching in a Consumer Electronics Closed-Loop Supply Chain

Problem definition: We examine a dynamic assignment problem faced by a large Wireless Service Provider (WSP) that is a Fortune 100 company. This company manages two warranties: (i) a customer warranty that WSP offers its customers, and (ii) an Original Equipment Manufacturer (OEM) warranty that OEMs offer the WSP. The WSP uses devices refurbished by the OEM as replacement devices and hence their warranty operation is a closed-loop supply chain. Depending on the assignment policy WSP uses, the customer and OEM warranties might become misaligned for customer-device pairs, potentially incurring a cost for WSP. Academic/practical relevance: We identify, model, and analyze a new dynamic assignment problem that emerges in this setting called the warranty matching problem. We introduce a new class of policies, called farsighted policies, which can perform better than myopic policies. We also propose a new heuristic assignment policy, the sampling policy, which leads to a near-optimal assignment. Our model and results are motivated by a real-world problem, and our theory-guided assignment policies can be used in practice; we validate our results using data from our industrial partner. Methodology: We formulate the problem of dynamically assigning devices to customers as a discrete-time stochastic dynamic programming problem. Because this problem suffers from the curse of dimensionality, we propose and analyze a set of reasonable classes of assignment policies. Results: The performance metric that we use for a given assignment policy is the average time that a replacement device under a customer warranty is uncovered by an OEM warranty. We show that our assignment policies reduce the average uncovered time and the expected number of out-of-OEM-warranty returns by more than 75% in comparison to our industrial partner's current assignment policy. We also provide distribution-free bounds for the performance of a myopic assignment policy, and of random assignment, which is a proxy for the current WSP policy. Managerial implications: Our results indicate that, in closed-loop supply chains, being completely far-sighted might be better than being completely myopic. Also, policies that are effective in balancing short-term and long-term costs can be simple and effective, as illustrated by our sampling policy. We describe how the performance of myopic and farsighted policies depend on the size and length of inventory build-up.

Two-Dimensional Product Warranty Cost Model under Preventive Maintenance Time Constraints

Two-Dimensional Product Warranty Cost Model under Preventive Maintenance Time Constraints