Warranty Analysis (Review)

This paper reviews publications on warranty theory accessible to us. It is known that products, industrial wares, technical equipment, etc. are usually sold together with a certain warranty which is valid during a given warranty period. During this period the producer guarantees tile correct operation of his product and the repair, replacement or compensation for damage resulting from failure or poor performance by paying all or part of the resulting losses. This is the consumer's recourse. The warranty period offered by the producer contains information on the quality and reliability of the product, hence it provides additional advertisement and a means of comparing similar products of different brands. Due to a number of random factors influencing the operation of the product, methods of determining warranty periods and policies must be probabilistic ones. They must necessarily take into account the difference in operating conditions, reliability and quality characteristics, their variation in time, some economic indices -the product's cost, cost of repair, compensation for losses from idle time, marketing prices, etc. Together with the type of product, all these factors may be a source for the creation of different models ill warranty ana.lysis. The choice of too short, as well as too long, a. warranty period may be unprofitable for the producer because too short a warranty period will interfere with sales, while a too long one will lead to losses from compensaticm of consumer claims. Therefore the warranty theory protects the producer's interests in some sense because of tile possibility of rejecting the unreasonable demands of consumers. These arguments show that the problem of determining optimal relations between the quality and reliability indicators of the product, its market price, and warranty expenditures is a reasonable one. According to the literature, a producer has to decide on the following principal warranty problems: specification of the warranty policy; fixing the warranty period; specification of the warranties; investigation and prediction of the warranty expenditure in order to build up a warranty reserve, or more simply, warranty costs. The solution of these problems depends on the aim of the warranty program, namely protection or advertisement. For a. given warranty policy the corresponding warranty costs greatly depend on the duration of the warranty period, on the quality of the products, on their reliability, on types of renewals, etc. Problems related to warranties attract attention in economics and science. They are very similar to those in risk theory, the theory of technical maintenance, etc., but they possess their own specific features. Biedenweg [27] lists more than 130 papers that have been published in the field of warranty analysis for the last 30 years. Investigations on warranty analysis are actively performed in the USA, Australia, Canada, and ,J ap an. In Section 2 of this review we give the basic notions of warranty theory and introduce some notations. We consider the class of models related to the warranty analysis of nonrepairable items, which are mostly hlvestiga.ted in this field.