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Warranty cost analysis for second-hand products under a two-stage repair-or-full refund policy

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  • Park, Minjae
  • Jung, Ki Mun
  • Park, Dong Ho

Abstract

With this paper, we consider an optimal warranty policy for second-hand products based on a two-stage repair-or-full-refund maintenance strategy to determine an optimal length of warranty period from the dealer's point of view. Because replacing failed products may not be an option with second-hand products, we newly introduce in this paper the concept of full refund rather than replacement. We pre-specify a repair time threshold and define the length of maintenance period during which the dealer will maintain the product as the product maintenance cycle. Following this policy, if the product failure cannot be repaired within the repair time threshold during the warranty period, the user receives a full refund and the maintenance cycle ends. Otherwise, the user receives only minimal repairs to the product, and if the dealer does not issue a full refund during the warranty period, the maintenance cycle ends when the warranty expires. Given a certain cost structure charged to the dealer, we derive mathematical formulas to evaluate the expected length of a maintenance cycle and the expected total maintenance cost during the cycle. As a criterion for the optimality of the warranty policy, we utilize the expected cost during the product maintenance cycle to propose the optimal warranty policy. Assuming the power law model for product failures and a two-parameter Weibull distribution for the repair times, we illustrate our proposed warranty policy numerically and conduct sensitivity analysis to study the impacts of several relevant parameters on the optimal warranty policy.

Suggested Citation

  • Park, Minjae & Jung, Ki Mun & Park, Dong Ho, 2020. "Warranty cost analysis for second-hand products under a two-stage repair-or-full refund policy," Reliability Engineering and System Safety, Elsevier, vol. 193(C).
    • Handle: RePEc:eee:reensy:v:193:y:2020:i:c:s0951832018305404
    DOI: 10.1016/j.ress.2019.106596
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    References listed on IDEAS

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    Cited by:

    1. Wu, Shaomin & Wu, Di & Peng, Rui, 2023. "Considering greenhouse gas emissions in maintenance optimisation," European Journal of Operational Research, Elsevier, vol. 307(3), pages 1135-1145.
    2. Santos, Augusto César de Jesus & Cavalcante, Cristiano Alexandre Virgínio & Wu, Shaomin, 2023. "Maintenance policies and models: A bibliometric and literature review of strategies for reuse and remanufacturing," Reliability Engineering and System Safety, Elsevier, vol. 231(C).
    3. Santos, Augusto César de Jesus & Cavalcante, Cristiano Alexandre Virgínio, 2022. "A study on the economic and environmental viability of second-hand items in maintenance policies," Reliability Engineering and System Safety, Elsevier, vol. 217(C).
    4. Li, Ting & He, Shuguang & Zhao, Xiujie, 2022. "Optimal warranty policy design for deteriorating products with random failure threshold," Reliability Engineering and System Safety, Elsevier, vol. 218(PA).
    5. Shang, Lijun & Liu, Baoliang & Qiu, Qingan & Yang, Li & Du, Yongjun, 2023. "Designing warranty and maintenance policies for products subject to random working cycles," Reliability Engineering and System Safety, Elsevier, vol. 234(C).
    6. Lijun Shang & Yongjun Du & Cang Wu & Chengye Ma, 2022. "A Bivariate Optimal Random Replacement Model for the Warranted Product with Job Cycles," Mathematics, MDPI, vol. 10(13), pages 1-16, June.
    7. Santos, Augusto César de Jesus & Cavalcante, Cristiano Alexandre Virginio & Ren, Junru & Wu, Shaomin, 2023. "A novel delay time modelling method for incorporating reuse actions in three-state single-component systems," Reliability Engineering and System Safety, Elsevier, vol. 234(C).
    8. Safaei, Fatemeh & Ahmadi, Jafar & Taghipour, Sharareh, 2022. "A maintenance policy for a k-out-of-n system under enhancing the system’s operating time and safety constraints, and selling the second-hand components," Reliability Engineering and System Safety, Elsevier, vol. 218(PA).
    9. 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).
    10. Liu, Peng & Wang, Guanjun & Su, Peng, 2021. "Optimal maintenance strategies for warranty products with limited repair time and limited repair number," Reliability Engineering and System Safety, Elsevier, vol. 210(C).

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