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Book part
Publication date: 20 August 2018

Amit Mitra

Two-dimensional warranty policies exist for certain consumer products, such as automobiles. Here, warranty is specified in terms of the time since the sale of the product as well…

Abstract

Two-dimensional warranty policies exist for certain consumer products, such as automobiles. Here, warranty is specified in terms of the time since the sale of the product as well as mileage incurred during that period. Thus, at the time of purchasing the product, the manufacturer may offer a warranty of three years or 30,000 miles, whichever occurs first. Failures in the product within this specified period of time or mileage will be covered by the manufacturer.

In this chapter, we consider the scenario of enterprise warranty programs, where customers are given the option of extending the original warranty. Thus, the buyer could be given an option to purchase a five year—50,000 mile warranty, whichever occurs first. Of course, the buyer will be expected to pay a premium to purchase this extended warranty. Such enterprise warranty programs are also found in other consumer durables, such as refrigerators, washers, dryers, and cooking ranges.

This chapter explores determination of the decision variables, such as product price, warranty time, and usage limit under the original conditions and further, for the enterprise warranty, that is, the extended warranty time and extended usage limit, as well as the premium to be charged to the buyer who selects the extended warranty. Mathematical models are developed based on maximizing the expected unit profit by selecting an enterprise warranty program. Additionally, some other objectives are also considered based on the proportional increase in the expected unit profit due to the increased market share attained through the offering of an enterprise warranty program. Some results are obtained through consideration of various goal values of the chosen objectives.

Book part
Publication date: 6 November 2013

Amitava Mitra and Jayprakash G. Patankar

Various types of warranty programs are offered for consumer products. The two most common are a linear pro-rata warranty or a lump-sum warranty, if product failure occurs prior to…

Abstract

Various types of warranty programs are offered for consumer products. The two most common are a linear pro-rata warranty or a lump-sum warranty, if product failure occurs prior to the specified warranty time. In this chapter we consider additional types of warranty programs that allow the consumer to purchase a one-time extended warranty in the event of no failure within the initial warranty period. For the extended period, warranty may be linearly pro-rated, starting at an amount that is lower than the initial purchase price. Alternatively, for the extended period, warranty may be a lump-sum amount, that is less than the initial warranty amount. Expressions for the expected costs under each of the programs are derived. Guidelines are provided for determining the parameters of each warranty program under relevant constraints. Sensitivity analysis is also conducted to determine the effect of the problem parameters on the expected warranty costs.

Details

Applications of Management Science
Type: Book
ISBN: 978-1-78190-956-0

Keywords

Book part
Publication date: 14 November 2011

Amitava Mitra and Jayprakash G. Patankar

This chapter considers warranty policies involving two attributes, such as the time elapsed since sale of the product and product usage at a given point in time. Examples of such…

Abstract

This chapter considers warranty policies involving two attributes, such as the time elapsed since sale of the product and product usage at a given point in time. Examples of such policies are found for automobiles, where warranty may be invoked by the consumer if both time and usage are within specified warranty parameters when a product failure occurs. Here, we assume that usage and product age are related through a random variable, the usage rate, which may have a certain probabilistic distribution as influenced by consumer behavior patterns. Furthermore, product failure rate is influenced by the usage rate and product age as well as research and development expenditures per unit. It is assumed that, in production, there is a learning effect with time. The attained market share of a product will be influenced by the warranty policy parameters of warranty time and usage limit and also by the product price and product quality. An integrated model is developed to address multiobjective goals such as attainment of a specified level of market share and net profit per unit when manufacturing and warranty costs are taken into account. The impact of the goal priorities are investigated on the attained warranty policy parameters.

Details

Advances in Business and Management Forecasting
Type: Book
ISBN: 978-0-85724-959-3

Book part
Publication date: 12 April 2012

Amitava Mitra and Jayprakash G. Patankar

Two-attribute warranty policies are considered that incorporate, for example, the time elapsed since sale of the product and product usage at a given point in time. Such policies…

Abstract

Two-attribute warranty policies are considered that incorporate, for example, the time elapsed since sale of the product and product usage at a given point in time. Such policies occur in consumer products, such as automobiles, where warranty may be exercised if both time and usage are within specified warranty parameters when a product failure occurs. In this chapter, it is assumed that usage and product age are related through a random variable, the usage rate, which may have a certain probabilistic distribution as influenced by consumer behavior patterns. Product quality is modeled through the product failure rate, which is influenced by unit research and development expenditures as well as the usage rate and product age. The attained market share of the product is modeled as a function of the warranty policy parameters of price, warranty time, and usage limit, with product quality also having an influence. Attainment of single and multiple objectives are explored. Such objectives encompass expected total unit costs as a proportion of unit product price and market share.

Details

Applications of Management Science
Type: Book
ISBN: 978-1-78052-100-8

Book part
Publication date: 17 January 2009

Amitava Mitra and Jayprakash G. Patankar

Warranty policies for certain products, such as automobiles, often involve consideration of two attributes, for example, time and usage. Since consumers are not necessarily…

Abstract

Warranty policies for certain products, such as automobiles, often involve consideration of two attributes, for example, time and usage. Since consumers are not necessarily homogeneous in their use of the product, such policies provide protection to users of various categories. In this chapter, product usage at a certain time is linked to the product age through a variable defined as usage rate. This variable, usage rate, is assumed to be a random variable with a specified probability distribution, which permits modeling of a variety of customer categories. Another feature of the chapter is to model the propensity to execute the warranty, in the event of a failure within specified parameter values (say time or usage). In a competitive market, alternative product/warranty offerings may reduce the chances of exercising the warranty. This chapter investigates the impact of warranty policy parameters with the goal of maximizing market share, subject to certain constraints associated with expected warranty costs per unit not exceeding a desirable level.

Details

Advances in Business and Management Forecasting
Type: Book
ISBN: 978-1-84855-548-8

Book part
Publication date: 15 August 2006

Amitava Mitra and Jayprakash G. Patankar

A warranty policy involving two attributes, for example time and usage, is considered. Usage is assumed to be related to time through the usage rate, which is considered to be a…

Abstract

A warranty policy involving two attributes, for example time and usage, is considered. Usage is assumed to be related to time through the usage rate, which is considered to be a random variable satisfying a specified probability distribution. The paper analyzes a policy where warranty is not renewed on product failure, within the specified time period and amount of usage, but is minimally repaired. Unit cost of minimal repair, conditional on the usage rate, is assumed to be a non-linear function of the two warranty parameters. Expressions for the expected warranty costs per unit sales are derived. Applications of the results are presented through sample computations. The results demonstrate the use of warranty cost information in selecting the parameters of the warranty policy.

Details

Applications of Management Science: In Productivity, Finance, and Operations
Type: Book
ISBN: 978-0-85724-999-9

Book part
Publication date: 7 October 2010

Amitava Mitra and Jayprakash G. Patankar

For certain consumer durables, such as automobiles, warranty policies involve two attributes. These could be the time elapsed since sale of the product and usage of the product at…

Abstract

For certain consumer durables, such as automobiles, warranty policies involve two attributes. These could be the time elapsed since sale of the product and usage of the product at a given point in time. Warranty may be invoked by the consumer if both time and usage are within specified warranty parameters when a product failure occurs. In this chapter, we assume that usage and product age are related through a random variable, the usage rate, which may have a certain probabilistic distribution as influenced by consumer behavior patterns. Additionally, product failure rate is influenced by the usage rate and product age. The integrated model includes expected unit warranty costs, expected unit research and development costs, and expected unit production costs. It is assumed that in production, there is a learning effect with time. A multiobjective model is incorporated with the objectives being market share and proportion of expected warranty costs relative to total manufacturing expenditures per unit. The goals could be conflicting in nature. The problem then is to determine the warranty policy parameters while attaining certain desirable values of the two objectives.

Details

Applications in Multicriteria Decision Making, Data Envelopment Analysis, and Finance
Type: Book
ISBN: 978-0-85724-470-3

Book part
Publication date: 17 November 2010

Amitava Mitra and Jayprakash G. Patankar

Some consumer durables, such as automobiles, involve warranties involving two attributes. These are time elapsed since the sale of the product and the usage of the product at a…

Abstract

Some consumer durables, such as automobiles, involve warranties involving two attributes. These are time elapsed since the sale of the product and the usage of the product at a given point in time. Warranty may be invoked by the customer if both time and usage are within the specified warranty parameters and product failure occurs. In this chapter, we assume that usage and product age are related through a random variable, the usage rate, which may have a certain probabilistic distribution as influenced by consumer behavior pattern. Further, product failure rate is influenced by the usage rate and product age. Of importance to the organization is to contain expected warranty costs and select appropriate values of the warranty parameters accordingly. An avenue to impact warranty costs is through research on product development. This has the potential to reduce the failure rate of the product. The objective then becomes to determine warranty parameters, while constraining the sum of the expected unit warranty costs and research and development (R&D) costs per unit sales, under a limited R&D budget.

Details

Advances in Business and Management Forecasting
Type: Book
ISBN: 978-0-85724-201-3

Book part
Publication date: 26 October 2020

Lorens A. Helmchen

Public reports of provider-specific patient outcomes aim to help consumers select suppliers of medical services. Yet, in an environment of rapidly changing medical technology and…

Abstract

Public reports of provider-specific patient outcomes aim to help consumers select suppliers of medical services. Yet, in an environment of rapidly changing medical technology and increasingly heterogeneous patient populations, and because they necessarily reflect the experience of other patients who received care in the past, such reports may be of limited value in helping patients forecast the probability of an adverse outcome for each provider they are considering. I propose that providers underwrite insurance policies that promptly pay patients a predetermined sum after an adverse outcome. Patients can use such outcome warranties to infer quality differences among providers easily and reliably. In addition, outcome warranties efficiently reward both providers and patients for reducing the risk of adverse outcomes and thereby improve the safety and affordability of health care. As such, outcome warranties help advance four important goals of health care management: reduction of financial risk, recruitment and retention of physicians, remediation of adverse outcomes, and raising the provider's reputation.

Book part
Publication date: 8 August 2022

Aditya Pandit and Surendra M. Gupta

Manufacturers and remanufacturers strive to maximize supply chain effectiveness by eliminating wastes in all their forms. This line of research extends the effectiveness during…

Abstract

Manufacturers and remanufacturers strive to maximize supply chain effectiveness by eliminating wastes in all their forms. This line of research extends the effectiveness during the products' working lives. Fraud in the warranty service chain (WSC) is one such source of waste that leads to revenue losses in the short term but when left unchecked leads to far worse results in the long term. Warranty frauds in the new product industry have received significant attention in recent literature. Addressing fraud issues in the remanufacturing industry have not been a high priority. Previous studies considered the primary parties in the WSC as possible sources of fraud. However, several unique opportunities exist for the secondary parties when it comes to fraud. This chapter considers fraud originating from one of the secondary parties of the WSC, namely the warranty administrator. The chapter models this fraud scenario using discrete event simulation and explores a possible fraud mitigation scenario.

Details

Applications of Management Science
Type: Book
ISBN: 978-1-80071-552-3

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