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Warranty And Optimal Upgrade Strategy For Used Systems: An Electric Drill Case Study

Author

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  • MAHMOOD SHAFIEE

    (Department of Mathematical Sciences, Chalmers University of Technology and University of Gothenburg, SE-412 96 Göteborg, Sweden)

  • STEFANKA CHUKOVA

    (School of Mathematics, Statistics and Operations Research, Victoria University of Wellington, Wellington, New Zealand)

  • MAXIM FINKELSTEIN

    (Department of Mathematical Statistics, University of the Free State, 339 Bloemfontein 9300, South Africa;
    Max Planck Institute for Demographic Research, Rostock, Germany)

Abstract

Offering warranty for a second-hand item stimulates the sales of the item, but at the same time, it accumulates additional warranty servicing cost. This additional cost can be reduced through actions that improve the reliability of the item, such as overhaul and upgrade. An upgrade action brings the second-hand item to an improved functional state and it effectively reduces the age of the item. In this paper, we propose a model aiming to determine the optimal upgrade action strategies that achieve a sensible trade-off between the cost of an upgrade action and the reduction of the expected warranty cost due to this action. A practical application case on electric drills is used to illustrate our findings.

Suggested Citation

  • Mahmood Shafiee & Stefanka Chukova & Maxim Finkelstein, 2012. "Warranty And Optimal Upgrade Strategy For Used Systems: An Electric Drill Case Study," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 29(04), pages 1-21.
    • Handle: RePEc:wsi:apjorx:v:29:y:2012:i:04:n:s0217595912500236
    DOI: 10.1142/S0217595912500236
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    References listed on IDEAS

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    1. Maxim Finkelstein, 2008. "Failure Rate Modelling for Reliability and Risk," Springer Series in Reliability Engineering, Springer, number 978-1-84800-986-8, December.
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    Cited by:

    1. Santos, Augusto César de Jesus & Cavalcante, Cristiano Alexandre Virgínio & Wu, Shaomin, 2023. "Maintenance policies and models: A bibliometric and literature review of strategies for reuse and remanufacturing," Reliability Engineering and System Safety, Elsevier, vol. 231(C).

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