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Last time buy decisions for products sold under warranty

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  • van der Heijden, Matthieu
  • Iskandar, Bermawi P.
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    Abstract

    Manufacturers supplying products under warranty need a strategy to deal with failures during the warranty period: repair the product or replace it by a new one, depending on e.g. age and/or usage of the failed product. An (implicit) assumption in virtually all models is that new products to replace the failed ones are immediately available at given replacement costs. Because of the short life cycles of many products, manufacturing may be discontinued before the end of the warranty period. At that point in time, the supplier has to decide how many products to put on the shelf to replace failed products under warranty that will be returned from the field (the last time buy decision). This is a trade-off between product availability for replacement and costs of product obsolescence. In this paper, we consider the joint optimization of repair-replacement decisions and the last time buy quantity for products sold under warranty. We develop approximations to estimate the total relevant costs and service levels for this problem, and show that we can easily find near-optimal last time buy quantities using a numerical search. Comparison to discrete event simulation results shows an excellent performance of our methods.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 224 (2013)
    Issue (Month): 2 ()
    Pages: 302-312

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    Handle: RePEc:eee:ejores:v:224:y:2013:i:2:p:302-312

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    Web page: http://www.elsevier.com/locate/eor

    Related research

    Keywords: Reliability; Inventory; Maintenance; Warranty; Spare parts; Last time buy;

    References

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    1. Murthy, D. N. P. & Solem, O. & Roren, T., 2004. "Product warranty logistics: Issues and challenges," European Journal of Operational Research, Elsevier, vol. 156(1), pages 110-126, July.
    2. Pourakbar, M. & van der Laan, E.A. & Dekker, R., 2011. "End-of-Life Inventory Problem with Phase-out Returns," Econometric Institute Research Papers EI 2011-12, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    3. SamatlI-Pa, Glay & Taner, Mehmet R., 2009. "The role of repair strategy in warranty cost minimization: An investigation via quasi-renewal processes," European Journal of Operational Research, Elsevier, vol. 197(2), pages 632-641, September.
    4. Jack, Nat & Van der Duyn Schouten, Frank, 2000. "Optimal repair-replace strategies for a warranted product," International Journal of Production Economics, Elsevier, vol. 67(1), pages 95-100, August.
    5. Yun, Won Young & Murthy, D.N.P. & Jack, N., 2008. "Warranty servicing with imperfect repair," International Journal of Production Economics, Elsevier, vol. 111(1), pages 159-169, January.
    6. Bermawi P. Iskandar & Nat Jack & D. N. Pra Murthy, 2012. "Two New Servicing Strategies For Products Sold With Warranty," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 29(03), pages 1240022-1-1.
    7. Teunter, Ruud H. & Klein Haneveld, Willem K., 2002. "Inventory control of service parts in the final phase," European Journal of Operational Research, Elsevier, vol. 137(3), pages 497-511, March.
    8. Karl Inderfurth & Kampan Mukherjee, 2008. "Decision support for spare parts acquisition in post product life cycle," Central European Journal of Operations Research, Springer, vol. 16(1), pages 17-42, March.
    9. Teunter, Ruud H. & Klein Haneveld, Willem K., 1998. "The `final orderrs problem," European Journal of Operational Research, Elsevier, vol. 107(1), pages 35-44, May.
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    Cited by:
    1. Shen, Yuelin & Willems, Sean P., 2014. "Modeling sourcing strategies to mitigate part obsolescence," European Journal of Operational Research, Elsevier, vol. 236(2), pages 522-533.

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