Volume 9 article 210 pages: 456 - 464

Published: May 22, 2017

DOI: 10.5937/jaes9- 1202

COMBINATION FREE REPLACEMENT AND PRO-RATA WARRANTY POLICY OPTIMIZATION MODEL

Jovan Radivojevic
Jovan Radivojevic
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∙ Dragan Stamenkovic
Dragan Stamenkovic
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∙ Vesna Spasojevic-Brkic
Vesna Spasojevic-Brkic
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Abstract

Product development risk increases more and more every day. One of the factors that affect this risk is product warranty. Warranty is a powerful marketing instrument for the manufacturer and a good protection for both the manufacturer and the customer, but it always involves additional costs to the manufacturer. These costs depend on the product reliability and the warranty parameters. This paper deals with the optimization of these parameters for known product failure distribution to reduce the warranty costs to the manufacturer while retaining the promotional function of the warranty. Combination free replacement and pro-rata warranty policy is chosen as a model and the length of free replacement and pro-rata policy periods are varied, as well as the coeffi cients that defi ne the pro-rata cost function. Warranty costs are obtained by using analytical equations and by simulation. The obtained results are shown and discussed and some concluding remarks are given.

Keywords

free replacement warranty pro-rata warranty combination costs optimization

Acknowledgements

This paper is a part of two important projects of The Ministry of Science and Technological Development of Serbia (project number TR 35045 – “Scientifi c-Technological Support to Enhancing the Safety of Special Road and Rail Vehicles” and TR 35040 – “Developed New Methods for Diagnosis and Examination Mechanical Structures”). The authors wish to express their gratitude to the investors in these projects, and to all persons who helped making this paper better.

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