8Warranty Models and Services

8.1 Introduction

A product warranty is an after‐sales service contract between the customer and the supplier under which the supplier (i.e. manufacturer or retailer) is obliged to repair, replace, or make compensation to the buyer in the case of product failure for a pre‐specified time period, referred to as the “warranty period.” Based on the rebate policy, a warranty program can be classified into a free replacement warranty, a pro‐rata warranty (PRW), or a combination of both. From the perspective of the coverage mechanism, a warranty can be divided into a renewing warranty (RW) and a non‐renewing warranty (NRW). This chapter aims to introduce different types of warranty rebate policy for non‐repairable and repairable products. Particularly, Section 8.2 provides an overview on warranty service models that are adopted by industries or studied in academia. Section 8.3 discusses the warranty rebate models of non‐repairable products and Section 8.4 extends them to repairable products. Section 8.5 discusses how to design and implement a warranty servicing contract during the new product introduction by considering the effect of the product's installed base. Section 8.6 investigates the effects of reliability growth on the cost saving of a product warranty in the aftermarket. In Section 8.7, we discuss the challenges of implementing an extended warranty (EW) in dual distribution channels, and also present the framework of a modeling two‐dimensional ...

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