Joint Determination of Price and Upgrade Level for a Warranted Second-hand Product

An upgrade action is a pre-sale procedure that brings the second-hand item to an improved functional state and effectively reduces its age. This action is usually costly and adds directly to the sale price of the second-hand product, but it improves the product reliability and can reduce the warranty servicing cost. In the present paper, we propose a decision model to determine the optimal price and upgrade strategy of a warranted second-hand product to maximize the dealer's expected profit. The objective function includes both demand and cost functions, where purchase price from an end user, upgrade cost, and warranty cost are involved. We illustrate our finding using real data on second-hand electric device. Also, a sensitivity analysis is conducted to evaluate the effect of model parameters on the optimal solution

Modeling and Analysis of Effective Ways for Improving the Reliability of Second-hand Products Sold with Warranty

Often, customers are uncertain about the performance and durability of the used/second-hand products. The warranties play an important role in reassuring the buyer. Offering the warranty implies that the dealer incurs additional costs to service any claims made by the customers. Reducing warranty costs is an issue of great interest to dealers. One way of improving the reliability and reducing the warranty servicing cost for second-hand items is through actions such as overhaul and upgrade which are carried out by the dealer or a third party. Improving actions allow the dealer to offer better warranty terms and to sell the item at a higher price. This paper deals with two effective approaches (virtual age approach and screening test approach) to decide on the reliability improvement strategies for second-hand products sold under various warranty policies (failure-free, rebate warranty, and a combination of free replacement and lump sum). A numerical example illustrates that from a dealer’s point of view, it is beneficial to carry out an improvement action only if the reduction in the warranty servicing cost is greater than the extra cost incurred due to this improvement action

Warranty and Maintainability Analysis for Sensor Embedded Remanufactured Products in Reverse Supply Chain Environment

Remanufactured products are very popular with consumers due to their appeal to offer the latest technology with lower prices compared to brand new products. The quality of a remanufactured product induces hesitation for many consumers, in regards to its efficacy and reliability. One stratagem that remanufacturers could employ to encourage customer security are product warranties. This paper studies and scrutinizes the impact that would be had by offering renewing warranties on remanufactured products. This study was able to determine the optimal costs of warranty for two-dimensional non-renewable warranty offered on remanufactured products using the simulation model and design of experiments

Warranty Period and Product Price Optimization for Remanufactured Products

This study considers a remanufactured electrical product under a tiered warranty policy. Warranty is key in ensuring a good manufacturer—consumer relationship. Manufacturers hope to minimize warranty costs while consumers believe that good warranty promises better product quality and reliability. This Thesis presents an optimal warranty period from the perspective of a manufacturer to maximize the total expected profits, while ensuring sustained consumer relation. We use real data from a local company with a global supply chain to provide a numerical example

Optimal Burn-in Time and Imperfect Maintenance Strategy for a Warranted Product with Bathtub Shaped Failure Rate

‘Burn-in/preventive maintenance’ programme is an efficient approach used to minimise the warranty servicing cost of a product with bathtub shaped failure rate. Burn-in is a widely used method to improve the quality of product during its ‘infant mortality’ period and preventive maintenance is a scheduled necessary activity carried out during its ‘wear-out’ period. In this paper, an optimisation model is developed to determine the optimal burn-in time and optimal imperfect preventive maintenance strategy that minimises the total mean servicing cost of a warranted product with an age-dependent repair cost. We provide a numerical study to illustrate our results

Two-dimensional Warranty Cost Analysis for Second-hand Products

In spite of the recent steady increase of the volume of the second-hand markets, often customers remain in doubt regarding the quality and durability of the secondhand products. Aiming to reduce and share this uncertainty, dealers offer warranty on their products. Offering warranty for second-hand products is a relatively new marketing strategy employed by dealers of used electronic equipment, furniture, automobiles, etc. Usually, for used products, the dealer’s expected warranty cost is a function of product reliability, past age and usage, servicing strategy and conditions and terms of the warranty policy/contract. Sometimes the offered policy is limited by two parameters, typically the product age and usage after the sale. This type of policies is referred to as two-dimensional warranty policies. In this article, we develop statistical models for estimating the dealer’s expected warranty cost for second-hand products sold with two-dimensional free repair/replacement warranty

Warranty and Sustainable Improvement of Used Products through Remanufacturing

Currently, a large number of used/second-hand products are being sold with remanufacturing. Remanufacturing is a process of bringing used products to a better functional state and can be applied as a way for (1) controlling the deterioration process, (2) reducing the likelihood of a failure over the warranty period and (3) making the used item effectively younger. Remanufacturing is relatively a new concept and has received very limited attention. In this paper, we develop an important sustainable improvement approach for used items sold with failure free warranty to determine the optimal improvement level. Our model makes a useful contribution to the reliability growth literature, as it captures the uncertainty and suggests improvement in the remanufacturing process. By using this model, the dealers can decide whether and how much to invest in remanufacturing projects

On assumptions in optimisation of warranty policies

Optimisation of warranty policy has been a hot research topic in both operations research and statistics communities since warranty providers hope to balance cost-benefit analysis in the nowadays competitive market. Some assumptions are inevitably needed for such research. Most of the existing publications, however, make assumptions that may not be true in practice, based on which biased decision may be made. This paper discusses pitfalls in the assumptions, which include causes of warranty claims, pattern of warranty claims, warranty claim models, field reliability vs product reliability, the relationship between usage and age in 2-dimensional warranty. A real-world example is used to elaborate the arguments