Warranty Duration Research Articles

Can new metrics be validated to reduce computer supply chain GHG emissions among end users?

The research objective is to create a mechanism that generates a valid 'sustainability' metric to enable prospective buyers to confidently identify low carbon footprint computers. The necessity is based upon the hypothesis that current product carbon footprint reports for computers are incomparable between brands. While the inconsistency of use-phase emissions has been addressed in prior associated research, supply chain emissions remain an issue. This is due to multiple scope 3 life cycle assessment methodologies being used by manufacturers that produce differing results even when applied to the same device. To test the theory and generate an alternative approach, the research analyses 244 notebook carbon footprint reports to show inconsistencies caused by five different methodologies. Based on the findings, an alternative approach to comparing supply chain impact is proposed that enables comparison between results. The new metric first generates an average scope 3 carbon footprint baseline value by device type (e.g. notebook). This is then reduced by specific values depending upon actions undertaken by manufacturers when calculating their original carbon footprint report. This includes deductions to the baseline value achieved by including high percentages of production and transport primary data, plus the availability and affordability of offerings that will extend device useful life spans to drive demand displacement. This includes warranty duration and cost plus ease of repair. The research finds that current methodologies create a range of inconsistency of +106% when used to calculate the carbon footprint of the same device and +142% when calculating similar device types. Therefore, the hypothesis of scope 3 emissions being incomparable is validated. Comparatively, the newly proposed mechanism shows a reduced range of inconsistency of 18% when demonstrated. As such, it is recommended that the new approach be applied to the latest version of the world's leading computer eco-label certification, TCO Certified version 10, in 2024. Doing so will enable organisations to confidently select low carbon footprint devices on a global scale and therefore meaningfully support the United Nations sustainable development goals of responsible consumption and production and ultimately climate action.

Reliability and Sensitivity Analysis of an Insured System with Conditional Warranty Duration Lengthier than Insurance Duration

The terms reliability, warranty and insurance are interwoven in some ways. The warranty of system and insurance coverage offered by the manufacturer or third party reflects its potential reliability. In certain situations, the insurance may expire before the warranty time. To address this issue, the reliability and sensitivity analysis of a single-unit insured system has been carried out. The system may functions in warranty period with or without insurance cover whereas no insurance cover is given during nonwarranty period. If faults are covered under warranty or the insurance terms, the manufacturer or insurance company is liable to pay all the repair/replacement costs; otherwise, the user must pay the entire cost. The reliability metrics of the system and factors impacting system profitability are derived using Markov and regenerative processes. Profit equations and sensitivity functions are established for all stakeholders. The sensitivity function for system availability is also derived for all the possible considered periods. Exponential distribution is used to illustrate the developed model numerically.

Genetic algorithm‐based price and warranty optimization in software systems

AbstractOwing to increasing competition, the marketing of commercial software products is a challenging task. Diverse marketing strategies are adopted to tap the huge market share. Among these, pricing and warranty are the most significant ones. The warranty policies organizations adopt usually have two dimensions: duration and effort spent during the warranty phase. In this paper, two variables are broadly taken: testing, which is an essential phase during software development, and warranty, which is a crucial component of after‐sales service. Here, we will formulate an optimization problem where returns and expenses will be influenced by price, testing resources spent, the duration for which testing is done, warranty duration and effort spent during warranty for the software product. The product sales are assumed to follow a Stochastic Bass model based on Non‐Homogeneous Poisson Process (NHPP). A free on‐site support warranty with an upper limit on duration and effort covers the 2D failure process. The numerical illustration is presented wherein profit is maximized by conjointly optimizing five variables, that is price, testing duration, testing effort, warranty duration and warranty effort. This study emphasizes on application of a popular soft computing, metaheuristic technique named genetic algorithm (GA) to solve an optimization problem for a software system. The solution to the Optimization problem is obtained using the GA tool in MATLAB. The results obtained have relevance in the industry for finding optimal values of significant variables before the release of newly developed software products to the ultimate client. The concept discussed in this paper has diverse applications in computer engineering, software and hardware industry.

Interaction between manufacturer’s recycling strategy and e-commerce platform’s extended warranty service

E-commerce platforms provide extended warranty service (EW) to achieve high profitability. Manufacturers need to distinguish whether consumers have purchased extended warranty services when recycling products. We establish a closed-loop supply chain model with extended warranty service. Three recycling pricing strategies of the manufacturer are discussed: a low recycling price only attracts consumers who do not purchase EW, a high recycling price attracts two types of consumers or discriminatory recycling prices for both types of consumers. The results show that discriminated pricing can attract consumers to participate in product recycling, improving product recycling quantity and saving manufacturing costs. The high recycling price is applicable when the base warranty period is short, and the residual value of the old products is low. The manufacturer and the e-commerce platform can both benefit from the three recycling strategies as compared to non-recycling. Manufacturer’s recycling can increase the price and demand of products, and the proportion of consumers purchasing EW is reduced. We also found that the e-commerce platform will not provide EW when the manufacturer’s base warranty duration is long.

Channel coordination with extended warranty when retailers compete

This paper studies coordination mechanisms for the supply chain with one manufacturer and two competing retailers, where the manufacturer directly sells the extended warranty service to the consumers. We find that the efficiency of the wholesale contract increases with retail competition, whereas it decreases with the extended warranty duration. For the symmetric competing retailers, a set of quantity discount contracts have been designed to coordinate channel with Pareto improvement. Especially, when retail competition approaches infinity, the quantity discount contract to coordinate the channel will degenerate into a simple wholesale contract. For the asymmetric competing retailers, three sets of contract structures have been identified, under which the complicated quantity discount contract combined with a two-part tariff or slotting allowance can achieve channel coordination with Pareto improvement of tripartite. The results are remarkably different from the symmetric retailer scenario.

A matter of timing: System requirements for repair and their temporal dimensions

AbstractResearch into repair within the circular economy (CE) typically focuses on technical aspects of design, policy, and markets, and often assumes simplified conditions for the user/owner and the product system to explain the barriers to scaling repair activities. However, factors occurring at pre‐use stages of the product's life cycle can significantly influence whether, and to what extent, repair is viable or possible, that is, warranty duration, after‐sale service provision, and access to necessities. The passing of time can directly and indirectly affect the ability, difficulty, and thus, the likelihood of repair activities being performed at each stage of the product's life cycle. Drawing from the literature and applying inductive systems‐thinking tools, we propose a framework for considering the “System of Repairability.” We delineate how the passing of time (temporal dimensions) affects one's ‘‘ability to repair,’’ as a product progresses through different life cycle phases (i.e., breakdown vs. repair vs. disposal), and the point(s) at which the repair is considered or attempted (i.e., year of usage). By integrating life cycle and temporal (time‐based) dimensions into a broad System of Repairability framework, we clarify relevant interconnections, iterations, sequences, and timing of decision points, stakeholders, and necessary conditions to facilitate an outcome of successful repair at the individual level, and thus intervention strategies for scaling repair within CE. We discuss how a policy mix can address the life cycle of products and the repair system more holistically. We conclude with a future outlook on how temporal dimensions can inform policy strategies and future research.

Software for warranty optimization

The research article is associated with warranty optimization. Warranty is one of the most important factors for each organization because it accounts for a large profit in the organizations. In the past research articles, the models developed are only for specific problems of warranty optimization. In this research, a generic model is developed that can be applied to any system for calculating the optimal alternatives, optimal types of warranty policy and optimal warranty durations for various components within a system. The constraints considered in the past by the researches are either related to customer’s criteria or related to manufacturer’s criteria. For the first time, this research article is able to provide solution for warranty optimization considering both the criteria as major constraints together. In this research article, an optimized model of warranty is developed. The model is made in the form of software (OptiW) for easy implementation for the users. This software can be applied to any system having various components like Weibull distribution or exponential distribution. This software can determine the type of warranty policies, type of alternatives used and optimum warranty duration period for various components within a system. In this model, life cycle cost is a non-linear objective function of minimization type subjected to two constraints. The constrains are mean time between failure (MTBF) taking into account the customer’s perspective and spare parts cost taking into account the manufacturers’ perspective. First, the numbers of failures for various warranty plans are simulated using inverse function of the cdf of Weibull distribution. The results of the simulation were required in the optimization model. Genetic algorithm is used to solve non-linear optimization model in the MATLAB. Graphical user interface is developed using guide tool in MATLAB. The software exe file is developed using deploy tool to make this software applicable to any window. Using this software OptiW, an engine problem having 29 components as a case study is solved. The results obtained from the OptiW have reduced life cycle cost as compared to existing model of warranty. The optimum warranty duration for 29 components was larger as compared to various existing warranty models. For the future scope, this research paper can be useful for other extended warranty models or for further research.

Optimal extended warranty strategy: uniform or nonuniform pricing?

AbstractManufacturers are increasingly selling extended warranties to achieve high profitability. An important question is to sell the traditional or flexible extended warranty (TEW vs. FEW). TEW is sold at the time of product sales with a uniform price, while FEW can be sold at the time of product sales (the first point) or at the end of base warranty (the second point) with nonuniform prices. When selling FEW, manufacturers need to decide whether to preannounce the difference between the first‐point and second‐point warranty prices. To address such challenging issues, we develop theoretical models regarding selling TEW or FEW and find that neither of the two warranty services is always superior to the other. Particularly, FEW outperforms TEW when the manufacturer's cost efficiency of warranty is relatively high and/or the total warranty duration is relatively short. Interestingly, when selling FEW, it is not always better off concealing the price difference information, which is counterintuitive.

A goal programming approach for multi-objective warranty optimization

Due to severe competition in the market, a manufacturer may need to redesign the product warranty so as to get an edge over the competitors. However, to be able to do that, a systematic approach is required that allows one to consider multiple objectives. In this paper, a multi-objective optimization approach is presented considering warranty type, warranty duration, component alternatives and support level as decision variables. The multiple-objectives are in the form of targets to be achieved for warranty attractiveness index, warranty cost, spare parts cost to the end user over the useful life of the product and mean time between failures. In this paper a weighted goal programming approach for solving this problem is presented, where the weights are derived for the different objectives using the criteria importance through intercriteria correlation method and the objective function is formulated using the loss function approach. The warranty optimization approach is illustrated using a real life example of an automobile engine manufacturer and is solved using a multi-objective genetic algorithm with elitism strategy.

Evolution of Machine Reliability and Life and Economics of Operational Use

Abstract The article presents new assumptions for reliability and life of machines, resulting from the development of technology. The innovative approach to reliability and life design as well as warranty duration planning is presented on an example of vehicle reliability characteristics. A new algorithm is proposed for the replacement of repairable objects costs by the price of life and reliability of new unrepairable ones. For the planning of the life of innovative machines, an effective method of technical progress rate determination is proposed. In conclusion, necessary modifications of machine and vehicle use systems, resulting from technology evolution and technical progress, are indicated. Finally, recommendations and directions of indispensable research in engineering and management of technical means of production are formulated.

The Paradox of a Warranty: Can No Warranty Really Signal Higher Quality?

Signaling theory predicts that the duration of warranty correlates positively to the perception of product quality. Longer warranty lengths would lead to more favorable product quality perceptions, which in turn would foster more favorable consumer evaluations. However, the handicap principle predicts that the absence of a warranty could actually increase consumer evaluations based on the premise that only the sellers that are very confident about the quality of their products would make such an offer. Through two studies, this research shows that the no-warranty condition can actually produce more favorable product evaluations and purchase intentions as opposed to a longer warranty offer.

An attractiveness index based approach for warranty optimization

Purpose – The purpose of this paper is to develop an attractiveness index-based warranty cost model considering decision variables as design alternatives, warranty duration and support level. Design/methodology/approach – A warranty optimization approach is illustrated using a real life example of an automobile engine with Mean Time Between Failures and Warranty Attractiveness Index as constraints. Findings – It will help to improve the customer satisfaction by giving a more attractive warranty compared to that being offered by the competitors. Practical implications – Approaches that consider the effect of decision variables on attractiveness of a warranty policy in a quantitative manner have received relatively less attention. The paper attempts to capture the attractiveness of warranty from the manufacturer as well as customer point of view. Originality/value – The proposed approach will help manufacturers to take appropriate decisions related to warranty parameters and component selection at the design stage.

Balancing Revenues and Repair Costs under Partial Information about Product Reliability

We consider the problem faced by a company selling a product with warranty and under partial information about the product reliability. The product can fail from multiple failure types, each of which is associated with an inherently different repair cost. If the product fails within the warranty duration, then the company is required to pay the repair cost. The company does not know the probabilities associated with different failure types, but it learns the failure probabilities as sales occur and failure information is accumulated. If the failure probabilities turn out to be too high and it becomes costly to fulfill the warranty coverage, then the company may decide to stop selling the product, possibly replacing it with a more reliable alternative. The objective is to decide if and when to stop. By formulating the problem as a dynamic program with Bayesian learning, we establish structural properties of the optimal policy. Since computing the optimal policy is intractable due to the high dimensional state space, we propose two approximation methods. The first method is based on decomposing the problem by failure types and it provides upper bounds on the value functions. The second method provides lower bounds on the value functions and it is based on a deterministic approximation. Computational experiments indicate that the policy from the first method provides noticeable benefits, especially when it is difficult to form good estimates of the failure probabilities quickly.

A road map to new product success: warranty, advertisement and price

In today’s hyper-competitive marketplace, new product introduction is commonly viewed as a vehicle for profitably growing businesses, yet market success remains rare and new innovative products fail at stunning rates. Current corporate thinking identifies a number of potential reasons, one of which lies in the poor execution of marketing-mix strategies. In this paper, we analyze how best to structure the marketing strategy of a company to foster and leverage his innovative new product with a focus on three variables—namely warranty duration, advertising spending and selling price—and attempt to provide a theoretical explanation for factors that affect optimal trajectories of these variables over time. We also conduct a detailed numerical study in order to test which market- and product-related factors have the most influence on and best explain the company’s new product introduction strategy, and illustrate the associated profit impacts. Our analysis proposes a time-variant threshold on advertising spending that structures the company’s marketing strategy over time. Secondly, we point out that warranty duration and price collectively follow the pattern of the diffusion curve of the new product, but reach their maximum levels before the new product matures. We also provide guidance about the effect of such market- and product-related factors as referral power, failure rates and effectiveness of advertising spending on a company’s new product introduction strategy.

Price and warranty competition in a duopoly distribution channel: dynamic stability analysis for boundedly rational agents

In this paper, we study competition and coordination issues in a duopoly distribution channel where two boundedly rational agents compete on their retail price and warranty policy. The paper analyses the dynamics of competition for three different possible cases where retailers compete: (i) exclusively on price, (ii) exclusively on warranty duration and (iii) both on price and warranty duration. We show that price and warranty competition are dynamically stable in nature under certain condition(s). In such cases, each competition model converges to an equilibrium. However the speed of the parameter adjustment determines how quickly the dynamic game will reach equilibrium and the paper analyses the stability of such an equilibrium. The model is illustrated through a numerical study and the results show that though coordination enhances system profit, it may affect the consumers with higher product price and lower warranty duration. Hence, in some cases, competition serves the firms better than coordination, particularly in terms of ‘social welfare’.

Do consumers discount parallel imports?

Using data from Taiwan’s Yahoo! auctions of Nikon cameras, this paper investigates whether there exists any difference in transaction results between commodities which are sold by authorized sellers and those which are parallel imports. We find that the parallel imports and the authorized products differ not only in the warranty duration offered by the sellers, but also in the formats in which they are listed, both of which substantially affect trade probability and transaction price. We show that, after taking into account the endogenous choice of listing formats and the characteristics of the sellers and the items, an authorized product has a 7% higher trade probability than that of a parallel import and, if there is a sale, the transaction price as a ratio of the manufacturer’s suggested retail price is 0.093 higher. A small number of less-experienced parallel import sellers, in an attempt to maintain a price comparable to the authorized product, list their items in pure auction with unusually high starting bids. This accounts for the overall lower trade probability for the parallel imports. If we disregard these sellers who adopt pure auction, the authorized product has higher transaction price than, but about the same trade probability as, the parallel import.

Quantifying the Economic Value of Warranties in the U.S. Server Market

We quantify the economic value of hardware base warranties in the U.S. server market to manufacturers, channel intermediaries, and customers. We further decompose the value of a warranty into its insurance value and its price discrimination value, which are the two main rationales for warranty provision in the server market. We use structural modeling and counterfactual experiments to accomplish the empirical task. We derive our demand model from utility maximization, which accounts for a customer's risk aversion behavior and heterogeneity. We obtain our pricing model from the profit maximization behavior of manufacturers and downstream firms in indirect channels, accounting for the institutional realities in the server market. Our empirical analysis uses quarterly data from 1999 to 2004 on server wholesale prices, retail prices, and sales for direct and indirect channels in the U.S. market. We find that manufacturers and downstream firms benefit from warranty provision and from sorting across heterogeneous customers by offering a menu of warranties. Customers also benefit from manufacturer warranty provision as well as from the menu of warranties offered. The insurance value of warranties increases and the price discrimination value of warranties decreases with warranty duration.

Coordinated warranty and burn-in strategies

In product reliability assurance, the warranty and burn-in (W&BI) strategies are usually selected separately, despite the fact that both depend on the early-life failure behavior of the product. This paper treats W&BI strategies together in order to examine the possible benefits of coordinated strategies for product performance management. As these strategies are meaningful only for decreasing hazard-rate systems, a Weibull life distribution is assumed for each system component. A net-profit model that includes an increase in product price as a function of warranty duration is constructed. The model shows how a coordinated W&BI strategy can be selected. The model is quite general and its extension to other cases is explained. A central point that is treated thoroughly is the renewal analysis necessary to determine replacement costs during burn-in and during the warranty period. As part of the analysis, a useful approximation is defined, and efficient optimization routines are identified. An example illustrates the use of analytical methods. The analysis and discussion of the example show that there are advantages in coordinating the selection of W&BI strategies.

Semiparametric estimation of warranty costs

A large class of financial models of costs associated with warranties involve functions that arise in renewal theory. The simplest interesting example is the renewal function which, for the purposes of this article, may be interpreted as the expected number of failures by a specific warranty duration. To estimate the renewal function, cross-sectional regression data is assumed to be available. The data is assumed to be semiparametric in that the observation may be expressed as a known function of a vector of covariates, a vector of unknown parameters and an unknown error term while no distributional assumptions are made on the error terms. An estimator of the renewal function is constructed and conditions are provided so that it is asymptotically normal, after suitable standardization. This estimator is a special case of a class of statistics introduced here called residual-based infinite order U-statistics. U-statistics are complex averages over functions of observations. In this article, the observation...

Warranties, Durability, and Maintenance: Two-sided Moral Hazard in a Continuous-Time Model

Double moral hazard in continuous time generates the familiar warranty pattern with full coverage for an initial block of time. The more complete the warranty, the better the producer's durability incentives and the worse the consumer's maintenance incentives. Using continuous time highlights the need for some warranty bound to avoid reaching the first-best as an unreasonable limit. Early in the paper, an exogenous bound is used, while later the bound arises endogenously from the possibility of abuse and repair. A quadratic example shows that the warranty's duration depends on the relative severity of the two moral hazard problems.