Jayprakash G. Patankar

Market share and warranty costs for renewable warranty programs

Abstract A majority of consumer products is associated with some type of warranty. The nature and extent of the warranty affect the sales, market share, costs and profits of many businesses. A warranty can be defined as an assurance from a seller to a buyer that the product sold is guaranteed to perform satisfactorily up to certain length of time, which is the warranty period. In case of product failure within the warranty period, it is assumed that the seller will conform to a rebate policy. In this paper the rebate policy is selected to be linear pro-rata or lump sum. The paper investigates warranty programs that offer customers the option to renew warranty, after an initial period, for a certain premium. The effect of such programs on market share and warranty costs is explored.

A nonrenewable minimal-repair warranty policy with time-dependent costs

Estimating warranty costs during the life cycle of a product is important to the manufacturer, who has to plan for creating a fund for warranty reserves. Replacement or repair costs associated with product-failure within the warranty period are drawn from this fund. This paper considers a policy where warranty is not renewed on product failure within the warranty period but the product is minimally repaired by the manufacturer. This implies that, on repair, the failure rate of the item remains the same as just prior to failure. Repair costs are assumed to depend on the product age. Such policies are suitable for complex and expensive products where repair typically involves a small part of the product. s-Expected warranty costs and amount of warranty reserves, based on a selected level of s-confidence, are derived. Applications of the results to various product market situations are considered. The results demonstrate how cost information can be used to decide and determine the warranty length.

A multi-objective model for warranty estimation

Abstract Almost all consumer products are associated with a certain warranty time as stipulated by the manufacturer. Such a statement of warranty provides the buyer with an assurance on the performance of the product in the stated period. On the other hand, manufacturers use warranties for promotional and protectional purposes. The paper develops a methodology to aid the manufacturer in selecting the price and warranty time of its products. The model considers the case where the products are assumed to be complements of each other. A multi-objective model is formulated where it is assumed that the decision maker is able to prioritize his goals. Some of these goals may be conflicting to each other. The goals considered include the achievement of a specified market share for each product, limitation on the total warranty cost as a given proportion of total sales, limitation of the warranty reserve for a given product as a proportion of the total warranty reserve for all products, and attainment of a minimum level of warranty reserve for a given product as a proportion of the total warranty reserve costs. A goal programming approach is used and the effects of the chosen parameters on the optimal solution, as well as goal achievements, are discussed.

An integrated multicriteria model for warranty cost estimation and production

Warranty cost estimation for multiple products is considered. The decision variables include the price, warranty time, production quantity, and lot size. System constraints on the above decision variables are based on absolute minimum and maximum values between which those variables should lie. Several goals are considered at different levels of priorities. Some of these goals may be conflicting. The goals considered included operation within a limited resource capacity, the achievement of a specified market share for each product, limitation on the total warranty cost as a given proportion of total sales, limitation of the warranty reserve for a given product as a proportion of the total warranty reserve for all products, and attainment of a minimum level of warranty reserve for a given product as a proportion of the total warranty reserve cost. A goal programming approach is used to solve the formulated problem. An example is illustrated using the proposed formulation, and goal achievements are discussed. Sensitivity analysis is also conducted for some of the model parameters. >

A multi-objective model for warranty cost estimation using multiple products

Abstract The paper considers warranty cost estimation for multiple products. The products are assumed to be substitutes. The decision variables include the price and the warranty time. Several goals are considered at different levels of priorities. Some of these goals may be conflicting to each other. The goals considered include the achievement of a specified market share for each product, limitation on the total warranty cost as a given proportion of total sales, limitation of the warranty reserve for a given product as a proportion of the total warranty reserve for all products and attainment of a minimum level of warranty reserve for a given product as a proportion of the total warranty reserve costs. A goal programming approach is used to solve the formulated problem. An example is illustrated using the proposed formulation and goal achievements are discussed.

A Multiobjective Model for Warranty Policies Integrating Product Quality, Market Share, and R&D Expenditures

This chapter considers warranty policies involving two attributes, such as the time elapsed since sale of the product and product usage at a given point in time. Examples of such policies are found for automobiles, where warranty may be invoked by the consumer if both time and usage are within specified warranty parameters when a product failure occurs. Here, we assume that usage and product age are related through a random variable, the usage rate, which may have a certain probabilistic distribution as influenced by consumer behavior patterns. Furthermore, product failure rate is influenced by the usage rate and product age as well as research and development expenditures per unit. It is assumed that, in production, there is a learning effect with time. The attained market share of a product will be influenced by the warranty policy parameters of warranty time and usage limit and also by the product price and product quality. An integrated model is developed to address multiobjective goals such as attainment of a specified level of market share and net profit per unit when manufacturing and warranty costs are taken into account. The impact of the goal priorities are investigated on the attained warranty policy parameters.

TWO-DIMENSIONAL WARRANTY POLICIES INCORPORATING PRODUCT DEVELOPMENT

Some consumer durables, such as automobiles, involve warranties involving two attributes. These are time elapsed since the sale of the product and the usage of the product at a given point in time. Warranty may be invoked by the customer if both time and usage are within the specified warranty parameters and product failure occurs. In this chapter, we assume that usage and product age are related through a random variable, the usage rate, which may have a certain probabilistic distribution as influenced by consumer behavior pattern. Further, product failure rate is influenced by the usage rate and product age. Of importance to the organization is to contain expected warranty costs and select appropriate values of the warranty parameters accordingly. An avenue to impact warranty costs is through research on product development. This has the potential to reduce the failure rate of the product. The objective then becomes to determine warranty parameters, while constraining the sum of the expected unit warranty costs and research and development (R&D) costs per unit sales, under a limited R&D budget.

Two-Dimensional Warranty Policies – Decision Making Under Multiple Objectives

Two-attribute warranty policies are considered that incorporate, for example, the time elapsed since sale of the product and product usage at a given point in time. Such policies occur in consumer products, such as automobiles, where warranty may be exercised if both time and usage are within specified warranty parameters when a product failure occurs. In this chapter, it is assumed that usage and product age are related through a random variable, the usage rate, which may have a certain probabilistic distribution as influenced by consumer behavior patterns. Product quality is modeled through the product failure rate, which is influenced by unit research and development expenditures as well as the usage rate and product age. The attained market share of the product is modeled as a function of the warranty policy parameters of price, warranty time, and usage limit, with product quality also having an influence. Attainment of single and multiple objectives are explored. Such objectives encompass expected total unit costs as a proportion of unit product price and market share.

Warranty costs for repairable products with a two-attribute policy: impact of warranty execution

A warranty policy involving two attributes, for example time and usage, is considered. Usage is assumed to be related to time through the usage rate, considered to be a random variable satisfying a specified probability distribution. The paper analyses a policy where the product is repaired on failure within the specified parameters but warranty is not renewed. The failure distribution of the repaired items is assumed to be different from the failure distribution of new items. Furthermore, the situation that warranty may not be executed all the time is incorporated. Consumer behaviour is modelled through a warranty execution function.

Warranty cost estimation using simulation

The purpose of this paper is to consider a warranty estimation problem using a simulation approach. Prior research has estimated warranty costs using mathematical expectations. In the simulated approach, the time to failure has been assumed to be exponentially distributed. Three different rebate functions are considered: a linear pro rata rebate, a lumpsum rebate, and a full rebate up to a certain point and a linear pro rata from then until the warranty expires.