A profit assessment model for equipment inspection and replacement under renewing free replacement warranty policy

For many types of equipment whose maintenance requires skilled labor or whose random failure may have serious consequences, such as aircraft engines, medical equipment and others, customers generally prefer to entrust maintenance activities to the manufacturer or any of its representatives. The latter must, in turn, provide the customer with a maintenance program that is economically viable for both parties. In this study, the customer and the manufacturer agree on what follows regarding a non-self-announcing failure equipment whose state is only known through inspection: during the warranty period, the manufacturer inspects the equipment according to a specified schedule which he establishes taking into account that the costs incurred for inspections and replacements are supported by him during the warranty period. After the expiration of the warranty, inspections and replacements are performed by the manufacturer and billed to the customer. Moreover, penalties related to inactivity periods between failures and their detection are always supported by the manufacturer. The warranty is applicable to any equipment replaced during the validity period of the service contract. This type of contract generates a profit for the manufacturer. In this paper, an analytical model taking into account the commitments of both parties has been developed. The model allows generating the instants (x1, x2,…, xn) at which the inspections must be performed and the corresponding expected profit for the manufacturer while considering the warranty period offered on the market for similar equipment. An algorithm has also been developed to generate the inspection instants given the costs structure and the lifetime probability distribution of the equipment. In a context where business models argue for a greater implication of suppliers towards their customers, the proposed decision model may be relevant and very useful.