Minimizing life cycle cost by managing product reliability via validation plan and warranty return cost

Andre Kleyner and Peter Sandborn

International Journal of Production Economics, 2008, vol. 112, issue 2, 796-807

Abstract: This paper presents a quantitative solution that minimizes the life cycle cost of a product by developing an optimal product validation plan. Dependability constitutes an integral view of a product's reliability, availability, maintainability, quality, and safety. The methodology developed in this paper incorporates several dependability-related activities into a comprehensive probabilistic cost model that enables minimization of the product's life cycle cost. The model utilizes the inverse relationship between the cost of product validation activities and the expected cost of repair and warranty returns. The model emphasizes the test duration and sample size for the environmental qualification tests performed in a product validation program. The overall stochastic cost model and its minimization are done with Monte Carlo simulation in order to account for uncertainties in model parameters. The model is demonstrated on an automotive electronics application. The results of this work provide application-specific optimal product validation plans and evaluate the efficiency of a product validation program from a life cycle cost point of view with an emphasis on the cost of validation and product warranties.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:112:y:2008:i:2:p:796-807

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