Optimal decision for warranty with consideration of marketing and production capacity

Abstract

A successful marketing strategy should be managed to integrate the decisions, such as pricing, post-sale service and production in order to maximise profits but most manufacturers did not fully consider how to integrate them into an effective one in the past. Therefore, in this study, we proposed a mathematical model and a corresponding solution algorithm to assist the decision-makers systematically to decide the synthetic decision. The decision-makers can make warranty and marketing decision according to their production capacity. Besides, the impacts on the profit, the sale, the price and the warranty when the related costs were varying are also discussed in the study, so that the decision-maker can more easily handle the possible situations. The failure times of the product in our study were drawn from a non-homogeneous Poisson process with a specific intensity function (linear, exponential or power law). A preventive maintenance programme was also considered in the warranty policy. Finally, a numerical example was given to demonstrate the effectiveness of the proposed model.

Keywords:

• free replacement warranty
• repairable products
• deterioration
• non-homogeneous Poisson process
• mathematical programming