IDEAS home Printed from https://ideas.repec.org/a/eee/reensy/v168y2017icp355-364.html
   My bibliography  Save this article

Aggregate discounted warranty cost forecasting considering the failed-but-not-reported events

Author

Listed:
  • Wang, Xin
  • Xie, Wei
  • Ye, Zhi-Sheng
  • Tang, Loon-Ching

Abstract

Warranty claims usually incur substantial costs to the manufacturers. In practice, it is not accurate or economical to reserve money for future claims based on the prediction of the overall (life cycle) warranty cost. As a more appropriate alternative, the aggregate warranty cost forecast technique can reduce the liquidity risks and improve the warranty service efficiency. In addition, when a product fails during the warranty period, a warranty claim will be counted only when the customer reports the failure to the manufacturer. This paper focuses on forecasting the discounted warranty cost, which depends on the product sales and failure processes, warranty terms, and customer behaviors, over arbitrary time interval. To characterize the failed-but-not-reported phenomenon, a flexible time-dependent function is proposed. We derive the mathematical formulations of related factors to discuss the modeling process of total discounted warranty cost over an arbitrary time interval (TDWCATI). The impacts of warranty length and customer reporting behavior are explored. The expectation and variance of the TDWCATI are obtained under the pro-rata warranty policy and the nonrenewable minimal-repair policy, which shows that the TDWCATI is useful in planning future warranty services and budgets over a specific time period.

Suggested Citation

  • Wang, Xin & Xie, Wei & Ye, Zhi-Sheng & Tang, Loon-Ching, 2017. "Aggregate discounted warranty cost forecasting considering the failed-but-not-reported events," Reliability Engineering and System Safety, Elsevier, vol. 168(C), pages 355-364.
    • Handle: RePEc:eee:reensy:v:168:y:2017:i:c:p:355-364
    DOI: 10.1016/j.ress.2017.04.009
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0951832016306949
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ress.2017.04.009?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wu, Shaomin, 2011. "Warranty claim analysis considering human factors," Reliability Engineering and System Safety, Elsevier, vol. 96(1), pages 131-138.
    2. Su, Chun & Wang, Xiaolin, 2016. "A two-stage preventive maintenance optimization model incorporating two-dimensional extended warranty," Reliability Engineering and System Safety, Elsevier, vol. 155(C), pages 169-178.
    3. Jayprakash G. Patankar & Amitava Mitra, 1995. "Effects of Warranty Execution on Warranty Reserve Costs," Management Science, INFORMS, vol. 41(3), pages 395-400, March.
    4. John W. Mamer, 1987. "Discounted and Per Unit Costs of Product Warranty," Management Science, INFORMS, vol. 33(7), pages 916-930, July.
    5. Warren W. Menke, 1969. "Determination of Warranty Reserves," Management Science, INFORMS, vol. 15(10), pages 542-549, June.
    6. Polatoglu, Hakan & Sahin, Izzet, 1998. "Probability distributions of cost, revenue and profit over a warranty cycle," European Journal of Operational Research, Elsevier, vol. 108(1), pages 170-183, July.
    7. Chattopadhyay, Gopinath & Rahman, Anisur, 2008. "Development of lifetime warranty policies and models for estimating costs," Reliability Engineering and System Safety, Elsevier, vol. 93(4), pages 522-529.
    8. Wallace R. Blischke & M. Rezaul Karim & D. N. Prabhakar Murthy, 2011. "Warranty Data Collection and Analysis," Springer Series in Reliability Engineering, Springer, number 978-0-85729-647-4, February.
    9. Anastasiadis, Simon & Anderson, Boyd & Chukova, Stefanka, 2013. "Auto warranty and driving patterns," Reliability Engineering and System Safety, Elsevier, vol. 116(C), pages 126-134.
    10. Xiaolin Wang & Chun Su, 2016. "A two-dimensional preventive maintenance strategy for items sold with warranty," International Journal of Production Research, Taylor & Francis Journals, vol. 54(19), pages 5901-5915, October.
    11. H. N. Amato & E. E. Anderson, 1976. "Note--Determination of Warranty Reserves: An Extension," Management Science, INFORMS, vol. 22(12), pages 1391-1394, August.
    12. Wei Xie & Lijuan Shen & Yuanguang Zhong, 2017. "Two-dimensional aggregate warranty demand forecasting under sales uncertainty," IISE Transactions, Taylor & Francis Journals, vol. 49(5), pages 553-565, May.
    13. Murthy, D.N.P. & Rausand, M. & Virtanen, S., 2009. "Investment in new product reliability," Reliability Engineering and System Safety, Elsevier, vol. 94(10), pages 1593-1600.
    14. Cigdem Gurgur, 2011. "Dynamic Cash Management of Warranty Reserves," The Engineering Economist, Taylor & Francis Journals, vol. 56(1), pages 1-27.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tong Peng & Liu Chunling, 2020. "Designing differential service strategy for two-dimensional warranty based on warranty claim data under consumer-side modularisation," Journal of Risk and Reliability, , vol. 234(3), pages 550-561, June.
    2. Liu, Xintian & Mao, Kui & Wang, Xiaolan & Wang, Xu & Wang, Yansong, 2020. "A modified quality loss model of service life prediction for products via wear regularity," Reliability Engineering and System Safety, Elsevier, vol. 204(C).
    3. Shang, Lijun & Liu, Baoliang & Qiu, Qingan & Yang, Li, 2023. "Three-dimensional warranty and post-warranty maintenance of products with monitored mission cycles," Reliability Engineering and System Safety, Elsevier, vol. 239(C).
    4. Lijun Shang & Guojun Shang & Qingan Qiu, 2022. "A Bivariate Post-Warranty Maintenance Model for the Product under a 2D Warranty," Mathematics, MDPI, vol. 10(12), pages 1-18, June.
    5. Lijun Shang & Xiguang Yu & Liying Wang & Yongjun Du, 2022. "Design of Random Warranty and Maintenance Policy: From a Perspective of the Life Cycle," Mathematics, MDPI, vol. 10(20), pages 1-22, October.
    6. Chehade, Abdallah & Savargaonkar, Mayuresh & Krivtsov, Vasiliy, 2022. "Conditional Gaussian mixture model for warranty claims forecasting," Reliability Engineering and System Safety, Elsevier, vol. 218(PB).
    7. Lijun Shang & Xiguang Yu & Yongjun Du & Anquan Zou & Qingan Qiu, 2022. "An Optimal Random Hybrid Maintenance Policy of Systems under a Warranty with Rebate and Charge," Mathematics, MDPI, vol. 10(18), pages 1-19, September.
    8. Cao, Zixia, 2022. "Brand equity, warranty costs, and firm value," International Journal of Research in Marketing, Elsevier, vol. 39(4), pages 1166-1185.
    9. Wang, Yukun & Liu, Yiliu & Li, Xiaopeng & Chen, Junyan, 2019. "Multi-phase reliability growth test planning for repairable products sold with a two-dimensional warranty," Reliability Engineering and System Safety, Elsevier, vol. 189(C), pages 315-326.
    10. Wei Xie, 2017. "Optimal pricing and two-dimensional warranty policies for a new product," International Journal of Production Research, Taylor & Francis Journals, vol. 55(22), pages 6857-6870, November.
    11. Wu, Shaomin & Do, Phuc, 2017. "Editorial," Reliability Engineering and System Safety, Elsevier, vol. 168(C), pages 1-3.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xiaolin Wang & Wei Xie, 2018. "Two-dimensional warranty: A literature review," Journal of Risk and Reliability, , vol. 232(3), pages 284-307, June.
    2. Wang, Xiaolin & Li, Lishuai & Xie, Min, 2020. "An unpunctual preventive maintenance policy under two-dimensional warranty," European Journal of Operational Research, Elsevier, vol. 282(1), pages 304-318.
    3. Cao, Zixia, 2022. "Brand equity, warranty costs, and firm value," International Journal of Research in Marketing, Elsevier, vol. 39(4), pages 1166-1185.
    4. Mitra, Amitava & Patankar, Jayprakash G., 1997. "Market share and warranty costs for renewable warranty programs," International Journal of Production Economics, Elsevier, vol. 50(2-3), pages 155-168, June.
    5. Gupta, Sanjib Kumar & Bhattacharya, Debasis, 2022. "Non-parametric estimation of bivariate reliability from incomplete two-dimensional warranty data," Reliability Engineering and System Safety, Elsevier, vol. 222(C).
    6. Chun, Young Hak & Tang, Kwei, 1995. "Determining the optimal warranty price based on the producer's and customers' risk preferences," European Journal of Operational Research, Elsevier, vol. 85(1), pages 97-110, August.
    7. Marlin U. Thomas & Sridevi S. Rao, 1999. "Warranty Economic Decision Models: A Summary and Some Suggested Directions for Future Research," Operations Research, INFORMS, vol. 47(6), pages 807-820, December.
    8. Wang, Xiaolin & Liu, Bin & Zhao, Xiujie, 2021. "A performance-based warranty for products subject to competing hard and soft failures," International Journal of Production Economics, Elsevier, vol. 233(C).
    9. Mitra, Amitava, 2021. "Warranty parameters for extended two-dimensional warranties incorporating consumer preferences," European Journal of Operational Research, Elsevier, vol. 291(2), pages 525-535.
    10. Hooti, Fatemeh & Ahmadi, Jafar & Longobardi, Maria, 2020. "Optimal extended warranty length with limited number of repairs in the warranty period," Reliability Engineering and System Safety, Elsevier, vol. 203(C).
    11. Wu, Shaomin, 2011. "Warranty claim analysis considering human factors," Reliability Engineering and System Safety, Elsevier, vol. 96(1), pages 131-138.
    12. Peng, Shizhe & Jiang, Wei & Huang, Wenpo & Luo, Qinglin, 2024. "The impact of gamma usage processes on preventive maintenance policies under two-dimensional warranty," Reliability Engineering and System Safety, Elsevier, vol. 242(C).
    13. Shafiee, Mahmood & Chukova, Stefanka, 2013. "Maintenance models in warranty: A literature review," European Journal of Operational Research, Elsevier, vol. 229(3), pages 561-572.
    14. Yongjun Du & Lijun Shang & Qingan Qiu & Li Yang, 2022. "Optimum Post-Warranty Maintenance Policies for Products with Random Working Cycles," Mathematics, MDPI, vol. 10(10), pages 1-16, May.
    15. Huang, Yeu-Shiang & Fang, Chih-Chiang & Lu, Chang-Ming & (Bill) Tseng, Tzu-Liang, 2022. "Optimal Warranty Policy for Consumer Electronics with Dependent Competing Failure Processes," Reliability Engineering and System Safety, Elsevier, vol. 222(C).
    16. Huang, Yeu-Shiang & Gau, Wei-Yo & Ho, Jyh-Wen, 2015. "Cost analysis of two-dimensional warranty for products with periodic preventive maintenance," Reliability Engineering and System Safety, Elsevier, vol. 134(C), pages 51-58.
    17. Yukun Wang & Yiliu Liu & Aibo Zhang, 2019. "Preventive maintenance optimization for repairable products considering two-dimensional warranty and customer satisfaction," Journal of Risk and Reliability, , vol. 233(4), pages 553-566, August.
    18. Chen, Cheng-Kang & Lo, Chih-Chung & Weng, Tzu-Chun, 2017. "Optimal production run length and warranty period for an imperfect production system under selling price dependent on warranty period," European Journal of Operational Research, Elsevier, vol. 259(2), pages 401-412.
    19. de Jonge, Bram & Scarf, Philip A., 2020. "A review on maintenance optimization," European Journal of Operational Research, Elsevier, vol. 285(3), pages 805-824.
    20. Rui Zheng & Chun Su & Yuqiao Zheng, 2020. "Two-stage flexible warranty decision-making considering downtime loss," Journal of Risk and Reliability, , vol. 234(3), pages 527-535, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reensy:v:168:y:2017:i:c:p:355-364. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/reliability-engineering-and-system-safety .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.