Modeling and analysis of a warranty policy using new and reconditioned parts

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  • Author: Navin Chari, Claver Diallo, Uday Venkatadri, Abdelhakim Khatab
  • Date: 24 August 2016
  • Copyright: Image appears courtesy of Getty Images

Sustainable development is broadly defined as meeting the needs of today without compromising the needs of future generations. Some of the concerns threatening the future include the scarcity of raw materials and increased pollution, greenhouse gas emissions, and waste. A solution to these problems of unsustainability is to design quality products that operate better, last longer, are easier to maintain, are easier to reuse, and have recoverable components. In order for these products to be reused, they have to be recovered from the consumer before entering the waste stream.

thumbnail image: Modeling and analysis of a warranty policy using new and reconditioned parts

The second life of products provides sustainable and financial opportunities to manufacturers by allowing their products to have utility after the end of their traditional lifecycle, enabled through remanufacturing processes such as refurbishing and reconditioning.

However, the inability to access a sufficient quantity of reconditioned components from end-of-life products can force the concurrent utilization of new components. Although not widely advertised by the original equipment manufacturers, it is very common for major consumer product and appliance manufacturers such as Apple, Dell and Samsung, to use a combination of new and reconditioned parts to carry out warranty repairs. Many other manufacturers from well-established industries, such as aerospace, automotive, mining, oil and gas, use a mixture of new and reconditioned parts and modules in their repairs.

This paper deals with the determination of an optimal warranty policy where a mixture of new and reconditioned components are used to carry out replacements upon failure for products under warranty. A mathematical model is developed to determine the optimal warranty length, sale price, age of reconditioned components, and the proportion of reconditioned components to be used. Numerical optimization is used to compute these optimal warranty policy parameters to maximize the total profit and experiments are conducted to derive managerial decision-making insights.

To read the article in full, please click on the link below:

Modeling and analysis of a warranty policy using new and reconditioned parts

Applied Stochastic Models in Business and Industry, Volume 32, Issue 4, pages 539–553, July/August 2016

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