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Decision Making in Two-Dimensional Warranty Planning (PSAM-0186)

Excerpt

The article deals with current problems of two-dimensional warranty, prediction of related warranty costs and estimation of an instant of warranty period expiration.

During selling consumer products, warranties play an important role, because recently they became a significant tool of competition fight and also because providing warranties has significant economic impacts for the supplier. Providing of warranty is always accompanied with additional costs, called warranty costs. Any decision connected with establishing a scope of provided warranties should be supported with an appropriate economic analysis, the basis of which is a prediction of warranty costs.

Currently, the so called two-dimensional warranties are provided for many products. To be able to predict warranty costs associated with providing these warranties depend especially on the following facts

• Warranty costs depend on a number of failures, which occur at the products during a warranty period and on the costs incurred to remove individual failures. Number of failures as well as repair costs has a character of random variables.

• A time of termination of warranty period is defined in two ways, for example, a guaranteed calendar time of usage and guaranteed operating time, while a warranty period expires whichever value is reached.

The article presents a procedure of predicting warranty costs when two-dimensional warranties are used for complex products in the initial stages of the life cycle.

In creating this procedure, the following simplifying assumption on the failure occurrence that facilitates a solution has been adopted. It is assumed that over a warranty period, basically, two types of failures can occur at the products:

• Failures the probability of which depend on a calendar time of usage and whose occurrence is not dependent on a time of operation.

• Failures the probability of which depend on a time of operation and the occurrence of which is not dependent on a calendar time of usage.

Individual steps of a procedure of predicting warranty costs are following:

• Decomposition of product into items;

• Identification of possible failures and character of their occurrence;

• Failure repair mode determination

• Prediction of a number of failure occurrence over a warranty period;

• Estimation of costs to repair a concrete failure;

• Resulting estimates.

A problem in estimating warranty costs when two-dimensional warranty is used is to determine an instant of termination of a warranty period for which warranty costs will be estimated. Assuming a warranty as considered in this article, in principle, a warranty period can be carried out in three ways described in the article that define a termination of a warranty period.

During a warranty period, usage of every product is different, so it is evident that it is difficult to determine in advance at which instant a warranty period expires. The article outlines a solution of this issue.

On solving an issue of two-dimensional warranties at vehicles, the customer's behavior has been researched in terms of mileage per one year. More than 800 personal cars of a middle class have been researched. The results and example of use of achieved information to plan warranties are shown in the article.

  • Summary/Abstract
  • 1. Introduction
  • 2. Nomenclature
  • 3. Two-Dimensional Warranties and Warranty Costs
  • 4. Warranty Cost Prediction Procedure
  • 5. Estimate of an Instant of Warranty Period Expiration
  • 6. Application in Warranties Planning
  • 7. Conclusions
  • References

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