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Last time buy decisions for products sold under warranty

Listed author(s):
  • van der Heijden, Matthieu
  • Iskandar, Bermawi P.
Registered author(s):

    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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    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
    DOI: 10.1016/j.ejor.2012.07.041
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    1. Karl Inderfurth & Kampan Mukherjee, 2008. "Decision support for spare parts acquisition in post product life cycle," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 16(1), pages 17-42, March.
    2. 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.
    3. 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.
    4. M. Pourakbar & E. Laan & R. Dekker, 2014. "End-of-Life Inventory Problem with Phaseout Returns," Production and Operations Management, Production and Operations Management Society, vol. 23(9), pages 1561-1576, 09.
    5. 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.
    6. 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.
    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. 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.
    9. Krikke, H.R. & van der Laan, E., 2009. "Last Time Buy and Control Policies With Phase-Out Returns : A Case Study in Plant Control Systems," Discussion Paper 2009-66, Tilburg University, Center for Economic Research.
    10. Pourakbar, M. & Frenk, J.B.G. & Dekker, R., 2010. "End-of-Life Inventory Decisions for Consumer Electronics Service Parts," Econometric Institute Research Papers EI 2009-48, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
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