Warranty Policy Research Articles

Does extended warranty depict competitive advantage to a retailer in a retail-e-tail channel supply chain

For a strong presence of online channel with superior policy traditional brick and mortar channel is losing its footprint rapidly. Under this situation does retail channel survive? To analyze this paper considers a retail-e-tail channel supply chain, where the retailer sells an extended warranty policy purely for its existence given the fierce price competition with the e-tail channel. It is realized that by selling a properly designed extended warranty policy the retailer generates a higher rate of profit margin than the manufacturer. Longer duration of extended warranty at a lower price attracts more customers to buy through the retail channel and hence enhances the retailer’s profit margin. Two different coordination contract mechanisms, namely, all unit quantity discount along with franchise fee, and revenue sharing contracts are proposed to resolve channel conflict and asymmetric Nash bargaining product is used for a particular profit split. It revels under any circumstance the retailer denies manufacturer’s warranty cost-sharing proposal for a better pay off.

E-Waste Generation and their Impacts on Health and Environment: A Study Over Gazipur District, Bangladesh

The electrical and electronics industry is one of the world’s fastest-growing manufacturing sectors. As a result of this rise in production, as well as the increasing rate of product consumption, e-waste from electrical and electronic equipment (EEE), has become the fastest-growing waste stream in the world. This study helps to quantify the existing generation rate, health, and environmental impacts of e-waste. A structured questionnaire has been processed in Gazipur and existing literature was reviewed. A total of 1200 households were interviewed using structured questionnaires. The results revealed that several income families used different types of electronics products. Eproduct consumption depends on an individual’s income and e-waste generation depends on warranty policy and product life cycle. The health consequences of both direct exposures during recycling and indirect exposures through environmental contamination are potentially severe but poorly studied. E-waste concepts are relatively new in Gazipur as a result this study revealed, 840 households were aware of health and environmental impacts. E-waste minimization, reuse, or recycling is necessary but it should be conducted in a safe and standardized system. Recycling stations should be established with maintaining safety measures for workers and to conserve the environment from being contaminated. The government should involve in waste management by establishing rules and regulations specific to health safety and environmental issue relating to e-waste

Optimal warranty policy with inspection for heterogeneous, stochastically degrading items

A new renewable warranty policy is suggested that increases probability of its success and can decrease warranty costs. An item from a heterogeneous population is inspected at some intermediate time during a warranty period and, if the observed level of degradation/wear exceeds some optimally predetermined value, it is screened out and replaced by the new one. Deterioration in homogeneous subpopulations of items is modeled by the inverse-Gaussian (IG) process, whereas heterogeneous populations are described by the mixed IG process. Probabilistic and cost analyses of the model are performed and the detailed illustrative example is presented and discussed.

Pricing and two-dimensional warranty policy of multi-products with online and offline channels using a value-at-risk approach

Nowadays, manufacturers often sell different products (models of a product) through both online and offline channels. To face challenges such as legislation or competition, manufacturers often need to provide warranties for their products. On the one hand, customers are more attracted to goods covered with a warranty; on the other hand, warranties generate additional costs for manufacturers. This study investigates a case that a manufacturer sells through online and offline channels and offers a two-dimensional warranty policy including a warranty-age and a warranty-usage package for sold products through online channel. Because different models share several components, failures of all manufacturer’s portfolio products are statistically dependent. A model to optimize both the pricing and warranty policies is proposed. Given that the claim rates for warranties are stochastic, the value-at-risk approach is implemented to solve the optimization problem. Furthermore, the covariance between warranty claims associated with different products is computed through a copula. The findings indicate the importance of considering the covariance among different models claims when optimal warranty policy is offered to customers along with the proper pricing strategy in an online channel.

A complimentary extended warranty: Profit analysis and pricing strategy

This paper aims to investigate the emerging trend of a new warranty policy in industries, namely, complimentary extended warranty. For the warranty with complimentary extended service, customers can enjoy a free extended warranty if they register online before expiration of the base warranty. At present, with frequent technological innovations, customers are more willing to replace the product instead of repair, which makes traditional warranty less attractive. Since the warranty with complimentary extended service does not charge extra fees for the customers and the option of online registration is open to customers, it can attract a broad range of customers. Compared with traditional warranties, the proposed warranty provides flexibility for customers in their post-purchase choice of online registration. We develop a warranty model to investigate the popularity of the warranty. It turns out that the proposed warranty model exhibits advantages over the traditional warranties. The proposed warranty is profitable for risk averse customers and for products that heap benefits from customer information. We design and price the warranty for unit product when the customers have heterogeneous risk attitudes. In addition, we analyze the total profit and determine the optimal selling price considering the customer demand. Finally, a numerical example is presented to illustrate the effectiveness of the proposed warranty policy.

Effect of inspection errors on imperfect production inventory model with warranty and price discount dependent demand rate

This paper deals with selling price-discount and warranty period dependent demand in an imperfect production inventory model under the consideration of inspection errors and time dependent development cost. Normally, due to long-run, a production process deteriorates with time and here we assume that the process shifts from "in-control" to "out-of-control" state at any random time. A time dependent development cost has been constructed to increase the reliability of the production systemi.e., to decrease the deterioration of the system during the production process. As a result, a few items are rejected. Here, two types of inspection errors such as Type-I error and Type-II error, have been considered during the period of product inspection process. In Type-I error, an inspector may choose falsely a defective item as non-defective and in Type-II error an inspector may choose falsely a non-defective item as defective. Due to these phenomena, the inspection process would consist of the following costs: cost of inspection, cost of inspection errors. The purpose of this paper is to investigate the effects of time dependent development cost on the defective items, selling price-discount and warranty policy on the market demand and finally optimize the expected average profit under consideration of such inspection costs in infinite time horizon. Some numerical examples along with graphical illustrations and sensitivity analysis are provided to test the feasibility of the model.

A flexible two‐dimensional basic warranty policy with two continuous warranty regions

AbstractFlexible warranty policies can satisfy customers by allowing them to select the warranty regions according to their usage rates. However, customers are usually unaware of their future usage rates when they purchase a product, which makes it difficult to make sound decisions. To address the problem, this paper proposes a flexible two‐dimensional basic warranty policy with two continuous rectangular regions. Customers can gain experience of their usage rates through the first region, and thus make the second region more cost‐effective. The total price of the two subregions is equal to the basic warranty price, which is prespecified by the manufacturer. The objective is to determine the optimal boundary between the two regions from the perspective of customers. First, the learning effect is used to depict the process of gaining experience from the first region. A warranty pricing model is then developed based on the polynomial failure intensity model. On that basis, the customer's expected repair cost over the warranty period is analyzed, and a numerical method is proposed for the optimization problem. A numerical example is presented to demonstrate the effectiveness of the proposed policy. The results show that customers can benefit more from the proposed policy than from the iso‐cost warranty policy.

Bi-objective optimization of basic and extended warranty policies regarding preventive maintenance and burn-in policies: Weibull bathtub-shaped failure rate

Today's after-sales services play an important role in the competitive market for product manufacturing and supply. The manufacturer, as the provider of basic warranty and third-party companies specializing in maintenance as extended warranty provider, seeks to minimize their costs, as well as improve product quality and customer attraction. In this regard, the application of burn-in policies can help the producer and the third-parties to achieve this. In this paper a nonlinear programming model is developed to (1) minimizing the total maintenance costs during the basic warranty and burn-in periods and (2) minimizing the total maintenance costs during the extended warranty period. Due to the complexity of the model, the multi-objective meta-heuristic solution approach is proposed based on a scatter search algorithm and variable neighborhood search algorithm. The optimization results showed that the application of burn-in policies by the manufacturer reduces the cost of preventive and corrective maintenance for the manufacturer and the third party. Also, the lack of a computational gap between the proposed solution approach and the exact solution method indicates the high efficiency of the proposed solution procedure through optimization of the research problem.

Analysis of a two-dimensional stair-case warranty policy with preventive maintenance

Abstract We develop a mathematical model to study optimal preventive maintenance (PM) strategy under a two-dimensional stair-case warranty policy considering both age and usage of a product. During the warranty term, sellers implement preventive maintenance within the stair-case region of the warranty policy and upon failure a product is repaired minimally and immediately. Our objective is to find the optimal PM strategy that minimizes the seller’s cost of warranty while jointly considering the age and usage intervals of the PM policy and the level of PM executed. We also discuss how our results compare to those in a two-dimensional warranty policy with a rectangular region, and we find that the stair-case policy is preferable for sellers. An algorithm is provided to find the optimal solution and a numerical example is presented to illustrate how to find an optimal strategy with our proposed method. We show numerically that the expected total warranty cost is convex both in the age and the usage of the product under certain conditions.

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.

A two-echelon supply chain model with price and warranty dependent demand and pro-rata warranty policy under cost sharing contract

In this article, a two-echelon supply chain model with a single-vendor a single-buyer is considered. The vendor's production process is imperfect and the market demand is assumed to be dependent on the buyer's selling price and warranty period. The vendor consents to return a definite portion of the buyer's purchase value, if any product is found defective within the length of warranty. The refund value or the warranty cost is considered as a function of the warranty period and the buyer's selling price of the item. This warranty cost is assumed to be fully borne by the vendor in the first model (Model I) while in the second model (Model II), it is assumed that the buyer agrees to bear a portion of the warranty cost. The proposed models are solved under decentralized scenario. We also derive and optimize the average total profit of the supply chain in order to obtain the optimal decisions of the centralized model. We consider a Stackelberg game between the vendor and the buyer in the decentralized scenario, where the vendor is assumed to be the leader and the buyer as the pursuer. Through numerical study, it is observed that, with respect to all the key decisions of the models, Model II provides better outcomes than Model I. Sensitivity analysis is also carried out to examine the impacts of changes of parameter-values on the optimum decisions.

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.

Integrated vendor–buyer strategies for imperfect production systems with maintenance and warranty policy

Collaboration has evolved as a key component of many modern supply chains, supporting the competitive advantages of companies in a range of operations from manufacturing to sales. With this viewpoint, the present paper develops an integrated inventory model in which manufacturing is carried out at the vendor’s end so as to fulfill demand at the buyer’s doorway. As the production process is presumed to be imperfect it shifts from an “in-control” state to “out-of-control” state at any random time and yields non-conforming items. The vendor uses regular preventive maintenance actions for the efficient operation of the production system and offers free minimal repair warranty on the products sold to the buyer. Along with preventive maintenance actions the vendor also uses the rework process and restoration process as effective steps towards minimizing the imperfections of the production system. The proposed model solves the non-linear cost minimization problem through a generalized reduced gradient method by using Lingo 15.0. The aim is to jointly optimize the order size, backorder size and the number of shipments in order to minimize the integrated cost of the vendor and the buyer. Numerical analysis and sensitivity analysis is performed on key parameters that render some important supervisory insights.

Design of differentiated warranty coverage that considers usage rate and service option of consumers under 2D warranty policy

Warranty service providers usually provide homogeneous warranty service to improve consumer satisfaction and market share. Considering the difference of consumers, some scholars have carried out studies on maintenance strategies, service pricing, payment method, claim behaviour and warranty cost analysis in recent years. However, few scholars have focused on the differentiated coverage of warranty service that considers usage rate and service option of consumers. On the basis of previous classification criteria on usage rate, this paper divides consumers into heavy, medium and light usage rate groups with clear boundaries. To avoid discrimination in warranty service, this study divides 2D warranty coverage into disjoint sub-regions and adopts different maintenance modes in each sub-region. By formulating and calculating warranty cost model under warranty cost constraints, we can obtain the maximum warranty coverage under usage rate \begin{document}$ r $\end{document} . Therefore, differentiated warranty scope for consumers in the three groups can be proposed, whilst consumers can choose the most suitable warranty service according to their usage rate. Evidently, the proposed warranty strategy can provide flexible warranty service for consumers, meet the requirements of the warranty cost constraints of warranty service providers and enable enterprises to occupy a favourable position in the market competition.

Effect of warranty and quantity discounts on a deteriorating production system with a Markovian production process and allowable shortages

This paper explores the retailer's optimal lot sizing and quantity backordering for a deteriorating production system with a two-state Markov production process in which quantity discounts are provided by the supplier. The products are sold with the policy of free reasonable repair warranty employing the fraction of nonconforming items in a lot size. Unlike the traditional economic production quantity (EPQ) model with warranty policy based on the elapsed time of the system in the control state follows an exponential distribution, this paper not only constructs an alternative mathematical model for EPQ model based on the fraction of nonconforming items in a lot size for an imperfect production system but also extends the topics of optimal quantity and shortage to a wider scope of academic research and further finds that some results are different from the traditional EPQ models. We seek to minimize the expected total relevant cost through optimal lot sizing and quantity backordering. We also demonstrate that the optimal lot size is bounded in a finite interval. An efficient algorithm is developed to determine the optimal solution. Moreover, a numerical example is given and sensitivity analysis is conducted to highlight management insights.

Joint optimal decisions on pricing and warranty policy of duopoly supply chain with one common retailer

Early researches related to the interaction between manufactures for complementary products, mainly considered price as only the dimension of competition. With the increasing competition in capturing the market share, manufactures cannot compete by only lowering prices. In this paper, we assume that besides the price, the manufactures choose warranty as the competitive strategy of two different but substitutable products in a duopoly supply chain with one common retailer. Furthermore, two cases are considered (i) only one manufacturer adopts warranty policy as a competitive strategy against the other, (ii) both manufacturers offer warranty on their product, to study under which situation offering a warranty becomes more profitable for a manufacturer while the other competitive manufacturer has already adopted warranty policy. The profit functions of the manufacturers and the retailer are then maximized under manufacturers' cooperative and non-cooperative strategies. We then compare the scenarios under different decision strategies numerically, which gives some insights on changes of key parameters to help the decision makers to capture the market.

Investment for process quality improvement and setup cost reduction in an imperfect production process with warranty policy and shortages

Cost reduction for setup and improvement of processes quality are the main target of this research along with free minimal repair warranty for an imperfect production System. This paper deals with the effect of setup cost reduction and process quality improvement on the optimal production cycle time for an imperfect production process with free product minimal repair warranty. Here the production system is subject to a random breakdown from ancontrolledsystem to anout-of-controlstate. Shortages are fully backlogged. The main target to minimize the total cost by simultaneously optimizing the production run time, setup cost, and process quality. A solution algorithm with some numerical experiments are provided such as the proposed model can illustrate briefly. Sensitivity analysis section is decorated for the optimal solution of the model with respect to major cost parameters of the system are carried out, and the implications of the analysis are discussed.

Warranty parameters for extended two-dimensional warranties incorporating consumer preferences

Certain products, such as automobiles, typically have warranty policies that incorporate two dimensions, namely time since purchase of the product and usage based on mileage accumulated. If both of these parameters are less than stipulated values in the warranty policy, in case of product failure, the manufacturer replaces or repairs the product free of charge. In many consumer durable goods, while an initial warranty is offered during purchase of the product, options exist to renew the warranty in the event of no product failure during the initial warranty. In this paper we consider such extended warranties in the context of two-dimensional policies. The decision variables in the formulated model are the warranty time and usage in the initial policy, the warranty time and usage in the extended policy, the product price, and the premium to be charged by the manufacturer for extending the warranty. We assume, however, that not all customers will choose to renew the warranty even if the product did not fail during the initial warranty. Customer propensity to renew warranty could be influenced by the unit product price and the customer's threshold price level, above which the customer is motivated to purchase an extended warranty.

Two-stage flexible warranty decision-making considering downtime loss

Most existing warranty policies are rigid, and the downtime loss is also not taken into account. This study develops a two-stage decision framework to design flexible warranty policies, where the downtime loss is considered. In the first stage, by minimizing the warranty service cost, a fixed warranty policy is provided to determine the baseline of preventive maintenance’s times and effort. In the second stage, customers have three options to increase preventive maintenance times, preventive maintenance effort, or both of them, which results in three types of flexible warranty policies. The additional maintenance cost for the increased preventive maintenance times and/or preventive maintenance effort is paid by the customers. Besides, the flexible policies are optimized to minimize customer’s cost, which is the sum of the downtime loss and shared maintenance cost. A practical example is provided to illustrate the effectiveness of the proposed flexible warranty policies. The results indicate that compared with the fixed warranty policies, both the manufacturer and customers can benefit from the proposed flexible policies, especially when the downtime loss is substantial. Moreover, the proposed policy is more effective when the warranty period is longer.

Reliability bounds for multi-state systems by fusing multiple sources of imprecise information

It is crucial to evaluate reliability measures of a system over time, so that reliability-related decisions, such as maintenance planning and warranty policy, can be appropriately made for the system. However, accurately assessing system reliability becomes challenging if only limited amounts of reliability data are available. On the other hand, imprecise information related to reliability measures of a system can be collected based on experts’ judgments/experiences, and these pieces of information may be, however, heterogeneous and come from multiple sources. By properly fusing the imprecise information, reliability bounds of a system can be assessed to facilitate the ensuing reliability-related decision-making. In this article, a constrained optimization framework is proposed to assess reliability bounds of multi-state systems by fusing multiple sources of imprecise information. The proposed framework is composed of three basic steps: (i) constructing a set of constraints for a resulting optimization formulation by representing all the imprecise information as functions of unknown parameters of the degradation models for components; (ii) identifying the upper and lower bounds of the system reliability function by resolving the resulting constrained optimization problem via a tailored feasibility-based particle swarm algorithm; and (iii) developing a model selection approach to choose the best component degradation model that matches with all the imprecise information to the maximum extent. A numerical example along with an engineering example is given to demonstrate the effectiveness of the proposed method.