Modelling warranty extensions: a case study in the automotive industry

Abstract

Warranty extensions are considered for automotive vehicles. In particular, the expected cost to a manufacturer of an extension to a base warranty is determined, while taking account of the effect of services during the warranty period. To model the effect of services, an inspection maintenance model is used that is based on the delay time concept. Therein, failures are preceded by defects, and the inspection of a vehicle while in the defective state facilitates the correction of such defects. Thus the typical circumstances in which a warranty places certain requirements on the customer to carry out a standard level of servicing is modelled. A vehicle is regarded as a complex system, with defects arising according to a counting process. Other defects that are present are allowed to be corrected when a vehicle fails. A case study carried out for Malaysian Truck Berhad is used to illustrate these concepts.