A customized two-dimensional extended warranty with preventive maintenance

Yeu-Shiang Huang, Chao-Da Huang and Jyh-Wen Ho

European Journal of Operational Research, 2017, vol. 257, issue 3, 971-978

Abstract: This study proposes a customized two-dimensional extended warranty policy, in which customers are classified into three categories with different operating conditions according to their maintenance records in the basic warranty period, and then different preventive maintenance (PM) schedules are applied to customers in the different categories. This study investigates the effects that the classification of a customer and the time-usage ratio of the repairable deteriorating product have on breakdowns of such a product to effectively manage the total costs within the extended warranty period. Periodic and non-periodic preventive maintenance programs are both considered to meet different customer requirements to ensure that product reliability would not be gradually unacceptable. By adopting the proposed extended warranty approach, customers with high utilization rates could have satisfactory reliability on their products by performing more frequent PM activities, while those with low and average utilization rates could reduce the cost of PM within the extended warranty period, and also enjoy acceptable product availability. The results show that the classification of customers into different categories cannot only be beneficial by providing an effective mechanism to reduce the warranty costs, but also be a valuable competitive marketing strategy for product providers.

Keywords: Extended warranty; Non-periodic preventive maintenance; Pro rata warranty (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:257:y:2017:i:3:p:971-978

DOI: 10.1016/j.ejor.2016.07.034

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