Skip to main content
Log in

Optimal pro-rata warranty decision with consideration of the marketing strategy under insufficient historical reliability data

  • ORIGINAL ARTICLE
  • Published:
The International Journal of Advanced Manufacturing Technology Aims and scope Submit manuscript

Abstract

Warranties play an important role in the market, not only safeguarding the rights and interests of consumers, but also promoting the sales and reputation of manufacturers. Due to their impacts on the market, manufacturers should take their warranty policies into consideration in developing an integrated marketing strategy which can promote a product by simultaneously considering pricing, production, and related post-sale services. Most of the studies regarding the issue of pro-rata warranties (PRW) only focus on cost analysis with the reliability estimation, and few consider how marketing strategies can be integrated in the warranty decision. Moreover, the manufacturer may not have sufficient historical data to estimate the deterioration of a newly developed product, and therefore, the results obtained from analytical models may not be reliable. A Bayesian analysis should be a reasonable approach in order to deal with such a problem for the situation of insufficient historical data because it can effectively assess the deterioration based on experts’ opinions and possibly few relevant data. Accordingly, this paper proposes a Bayesian decision-making model which considers the PRW policy with the pricing and the production strategy. Moreover, in order to deal with the complexity of computation of the proposed model, a heuristic algorithm is also provided, and finally, a practical application case is used to demonstrate its usefulness.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  1. Menke WW (1969) Determination of warranty reserves. Manag Sci 15:542–549

    Article  Google Scholar 

  2. Thomas MU (1983) Optimum warranty policies for non-repairable items. IEEE Trans Reliab 32:282–288

    Article  MATH  Google Scholar 

  3. Blischke WR, Murthy DNP (1994) Warranty cost analysis. Marcel Dekker, New York

    Google Scholar 

  4. Wang LH, Suzuki K, Yamamoto W (2002) Age-based warranty data analysis without date-specific sales information. Appl Stoch Model Bus Ind 18(3):323–337

    Article  MATH  MathSciNet  Google Scholar 

  5. Jain M, Maheshwari S (2006) Discounted costs for repairable units under hybrid warranty. Appl Math Comput 173:887–901

    Article  MATH  MathSciNet  Google Scholar 

  6. Saidi-Mehrabad M, Noorossana R, Shafiee M (2010) Modeling and analysis of effective ways for improving the reliability of second-hand products sold with warranty. Int J Adv Manuf Technol 46:253–265

    Article  Google Scholar 

  7. Shafiee M, Chukova S, Yun WY (2013) Optimal burn-in and warranty for a product with post-warranty failure penalty. The International Journal of Advanced Manufacturing Technology. [Online] DOI: 10.1007/s00170-013-5055-1.

  8. Yeh RH, Lo HC (2001) Optimal preventive-maintenance warranty policy for repairable products. Eur J Oper Res 134:59–69

    Article  MATH  MathSciNet  Google Scholar 

  9. Jung GM, Park DH (2003) Optimal maintenance policies during the post-warranty period. Reliab Eng Syst Saf 82:173–185

    Article  Google Scholar 

  10. Das AN, Sarmah AN (2010) Preventive replacement models: an overview and their application in process industries. Eur J Ind Eng 4:280–307

    Article  Google Scholar 

  11. Yeh RH, Kao KC (2011) Preventive-maintenance policy for leased products under various maintenance costs. Expert Syst Appl 38:3558–3562

    Article  Google Scholar 

  12. Kim BS, Ozturkoglu Y (2013) Scheduling a single machine with multiple preventive maintenance activities and position-based deteriorations using genetic algorithms. Int J Adv Manuf Technol 67:1127–1137

    Article  Google Scholar 

  13. Glickman TS, Berger PD (1976) Optimal price and protection period for a product under warranty. Manag Sci 22:1381–1390

    Article  Google Scholar 

  14. Boulding W, Kirmani A (1993) A consumer-side experimental examination of signaling theory: do consumers perceive warranties as signals of quality? J Consum Res 20:111–112

    Article  Google Scholar 

  15. Lassar WM, Folkes VS, Grewal D, Costley C (1998) Consumer affective reactions to product problems when the timing of warranty expiration varies. J Bus Res 42:265–270

    Article  Google Scholar 

  16. Juergen N (2004) Comparing quality signals as tools of consumer protection: are warranties always better than advertisements to promote higher product quality? Int Rev Law Econ 24:227–239

    Article  Google Scholar 

  17. Percy DF (2002) Bayesian enhanced strategic decision making for reliability. Eur J Oper Res 139(1):133–145

    Article  MATH  MathSciNet  Google Scholar 

  18. Juang MG, Anderson G (2004) A Bayesian method on adaptive preventive maintenance problem. Eur J Oper Res 155:455–473

    Article  MATH  MathSciNet  Google Scholar 

  19. Fang CC, Huang YS (2010) A study on decisions of warranty, pricing, and production with insufficient information. Comput Ind Eng 59:241–250

    Article  MathSciNet  Google Scholar 

  20. Huang Y-S, Bier VM (1998) A natural conjugate prior for the nonhomogeneous Poisson process with a power law intensity function. Commun in Statistics-Simulations and Comput 27:525–551

    Article  MATH  MathSciNet  Google Scholar 

  21. Jayabalan V, Chaudhuri D (1992) Cost optimization of maintenance scheduling for a system with assured reliability. IEEE Trans Reliab 41:21–25

    Article  MATH  Google Scholar 

  22. von Winterfeldt D, Edward W (1986) Decision analysis and behavioral research. Cambridge University Press, Cambridge

    Google Scholar 

  23. Clemen RT, Reilly T (2001) Making hard decisions with decision tools. Duxbury, Pacific Grove

    Google Scholar 

  24. Müller P, Parmigiani G (1995) Optimal design via curve fitting of Monte Carlo experiments. J Am Stat Assoc - Theory and Methods 90:1322–1330

    MATH  Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Chih-Chiang Fang.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Yeh, CW., Fang, CC. Optimal pro-rata warranty decision with consideration of the marketing strategy under insufficient historical reliability data. Int J Adv Manuf Technol 71, 1757–1772 (2014). https://doi.org/10.1007/s00170-013-5596-3

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00170-013-5596-3

Keywords

Navigation