Modeling of warranty cost for a lifetime warranty policy

Abstract

Nowadays, warranty, as a post-sale factor, can play an important role in product selection in today’s competitive market. Recently, manufacturers have started to extend warranty period for their product and offer them with long-term warranties. Among the long-term warranties, lifetime warranty is becoming more favorable to the customers as it provides the reliable performance assurance for the whole life of the product. Modeling the cost of offering lifetime warranty imposed to the manufacturer is one of the most significant areas in studying lifetime warranties. This study focused on modeling the cost of warranty for a free rectification lifetime warranty at system level. The main characteristic of the presented model is that it considered the variation of usage among the different customers while modeling warranty cost. The developed model was analyzed through a sensitivity analysis to investigate the effect of changes in model parameters on the cost of warranty. The output of presented model in this study is the expected cost of a lifetime warranty. This model can be applied by the manufacturers who plan to offer their products with lifetime warranties to investigate the cost associated with this kind of warranty and considering that in determining the sale price of their products.