A cost reduction framework for product quality improvement in warranty management

Kun Ren, Purdue University


In recent decades, warranties have become more important in deciding the overall product quality. In this thesis, we use warranty as the planning tool to improve product quality during the customer phase. We develop an analytical framework that consists of systematic planning methods to reduce the cost of warranty program operations. These planning methods are related through a warranty program cost and revenue structure. Based on such structure, each method is designed to either reduce one type of cost or to enhance the warranty revenue. ^ In chapter 2, we develop a method of reducing maintenance cost through warranty policy design. The method is featured by an embedded incentive for cooperative maintenance, of which the traditional warranty is a special case. We consider the nonrenewable and renewable incentives, and study the conditions under which the incentive is effective. The nonrenewable incentive takes form of a conditional rebate or one-time extended warranty with equivalent cost, while the renewable takes form of renewable extended warranty. Under certain assumptions, the renewable can be treated with a Markov decision approach. ^ In chapter 3, we develop a planning method that utilizes a recent result in maintenance research to enhance warranty revenue. Specifically, this method integrates cost-variability-sensitive maintenance into extended warranty planning. We find an upper bound for the acceptable warranty fee by a mixed criterion of expected cost and weighted cost variability. Using this upper bound, we develop a charge schedule for extended warranties. In addition, we study the cost-variation control for the customer. ^ Chapter 4 gives a method on reducing economic cost in warranty reserve management. Considering the economic costs as holding cost and penalty cost, the method focuses on adjusting warranty reserve over time. Instead of estimating warranty reserve per unit sold, we give a volume-based reserve solution for a growing sales process of homogeneous products. ^ Chapter 5 concludes the thesis with summary and future work. Generally, this framework stems from the philosophy that warranty feedback can be used for quality assessment and improvement. Via quality improvement purpose, it relates the paradigm of warranty, reliability and quality together in the customer phase. ^




Marlin U. Thomas, Purdue University, Mark A. Lawley, Purdue University.

Subject Area

Engineering, Industrial|Operations Research

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