Post-Sale Cost Modeling and Optimization Linking Warranty and Preventive Maintenance

Ph.DDOCTOR OF PHILOSOPH

Optimal Overhaul-Replacement Policies for Repairable Machine Sold with Warranty

This research deals with an overhaul-replacement policy for a repairable machine sold with Free Replacement Warranty (FRW). The machine will be used for a finite horizon, T (T <ï‚¥), and evaluated at a fixed interval, s (s< T). At each evaluation point, the buyer considers three alternative decisions i.e. Keep the machine, Overhaul it, or Replace it with a new identical one. An overhaul can reduce the machine age virtually, but not to a point that the machine is as good as new. If the machine fails during the warranty period, it is rectified at no cost to the buyer. Any failure occurring before and after the expiry of the warranty is restored by minimal repair. An overhaul-replacement policy is formulated for such machines by using dynamic programming approach to obtain the buyer's optimal policy. The results show that a significant rejuvenation effect due to overhaul may extend the length of machine life cycle and delay the replacement decision. In contrast, the warranty stimulates early machine replacement and by then increases the replacement frequencies for a certain range of replacement cost. This demonstrates that to minimize the total ownership cost over T the buyer needs to consider the minimal repair cost reduction due to rejuvenation effect of overhaul as well as the warranty benefit due to replacement. Numerical examples are presented for both illustrating the optimal policy and describing the behavior of the optimal solution

Some contributions to modeling usage sensitive warranty servicing strategies and their analyses

Providing a warranty as a part of a product\u27s sale is a common practice in industry. Parameters of such warranties (e.g., its duration limits, intensity of use) must be carefully specified to ensure their financial viability. A great deal of effort has been accordingly devoted in attempts to reduce the costs of warranties via appropriately designed strategies to service them. many such strategies, that aim to reduce the total expected costs of the warrantor or / and are appealing in other ways such as being more pragmatic to implement - have been suggested in the literature. Design, analysis and optimization of such servicing strategies is thus a topic of great research interest in many fields. In this dissertation, several warranty servicing strategies in two-dimensional warranty regimes, typically defined by a rectangle in the age-usage plane, have been proposed, analyzed and numerically illustrated. Two different approaches of modeling such usage sensitive warranty strategies are considered in the spirit of Jack, Iskandar and Murthy (2009) and Iskandar (2005). An `Accelerated Failure Time\u27 (AFT) formulation is employed to model product degradation resulting due to excessive usage rate of consumers. The focus of this research is on the analysis of warranty costs borne by the manufacturer (or seller or third party warranty providers) subject to various factors such as product\u27s sale price, consumer\u27s usage rate, types and costs of repair actions. By taking into account the impact of the rate of use of an item on its lifetime, a central focus of our research is on warranty cost models that are sensitive to the usage rate. Specifically, except the model in Chapter 4 where the rate at which an item is used is considered to be a random variable; all other warranty servicing policies that we consider, have usage rate as a fixed parameter, and hence are policies conditional on the rate of use. Such an approach allows us to examine the impact of a consumer\u27s usage rate on the expected warranty costs. For the purpose of designing warranties, exploring such sensitivity analysis may in fact suggest putting an upper limit on the rate of use within the warranty contract, as for example in case of new or leased vehicle warranties. A Bayesian approach of modeling 2-D Pro-rated warranty (PRW) with preventive maintenance is considered and explored in the spirit of Huang and Fang (2008). A decision regarding the optimal PRW proportion (paid by the manufacturer to repair failed item) and optimal warranty period that maximizes the expected profit of the rm under different usage rates of the consumers is explored in this research. A Bayesian updating process used in this context combines expert opinions with market data to improve the accuracy of the parameter estimates. The expected profit model investigated here captures the impact of juggling decision variables of 2-D pro-rated warranty and investigates the sensitivity of the total expected profit to the extent of mis-specification in prior information

A Two-dimensional Maintenance Service Contract Considering Availability and Maintenance Cost

In this paper, we study a two- dimensional Maintenance Service Contract (MSC) characterized by two limits (dimensions) of age and usage. It is considered that an agent offers a two-dimensional MSC by guaranteeing a certain level of equipment available to consumers. The agent needs to reduce the total maintenance cost to offer competitive MSC prices. Preventive maintenance actions (PM) are periodically carried out, and each PM action is considered to improve reliability modeled by reducing the failure rate function. Two decision variables (the PM interval (T) and the reduction in the intensity function  are obtained by considering two performance measures that are relevant to agents and consumers (i.e., availability and total maintenance cost). A numerical example is presented by considering three types of equipment usage rates: low, medium, and high. The optimization of the two performance measures can ensure availability targets and, at the same time, minimize total maintenance costs

A review on maintenance optimization

To this day, continuous developments of technical systems and increasing reliance on equipment have resulted in a growing importance of effective maintenance activities. During the last couple of decades, a substantial amount of research has been carried out on this topic. In this study we review more than two hundred papers on maintenance modeling and optimization that have appeared in the period 2001 to 2018. We begin by describing terms commonly used in the modeling process. Then, in our classification, we first distinguish single-unit and multi-unit systems. Further sub-classification follows, based on the state space of the deterioration process modeled. Other features that we discuss in this review are discrete and continuous condition monitoring, inspection, replacement, repair, and the various types of dependencies that may exist between units within systems. We end with the main developments during the review period and with potential future research directions

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

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 service contracts design for deteriorating products with maintenance duration commitments

With the increasing diversification of customers’ demand and purchasing behaviors, more and more manufacturers have focused their attention on the warranty service contracts design. The maintenance duration of the sold product, which plays an important role in the normal production and operation process of the user, is frequently taken into consideration in warranty contracts. In this study, we design different warranty contracts with various combinations of maintenance duration and availability requirements. The manufacturer commits to compensate for each overdue repair or failing to satisfy the availability target. The customers’ choice behavior is described by the multinomial logit (MNL) model, and customers often form their own minimum acceptable levels (also referred to as reference points) of maintenance duration and availability when making purchasing decisions, which have an impact on the contract choice. The expected warranty servicing profit is maximized to determine the optimal price, maintenance duration and availability. Finally, the proposed warranty contracts are demonstrated by numerical examples. We find that the maintenance duration affects not only the warranty cost but also the customer choice, which further affects the optimal contract pricing and profits