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The growing market for second-hand products facilitates the acceptance of warranty provided by dealers to promote sales and provide assurance for customers. Offering warranty results in additional cost due to warranty claims servicing. Such cost can be reduced through upgrade and preventive maintenance (PM) that improve the reliability of the product. Reliability improvement is worthwhile only if the cost incurred is less than the reduction in the warranty cost. For repairable second-hand products sold with a two-dimensional warranty, this paper investigates the worthiness of reliability improvement from the dealer’s viewpoint. A new modeling approach is proposed and studied, allowing the same product to have distinct degradation processes due to customer usage intensity variation. The effects of customer usage heterogeneity, upgrade and PM actions on the product reliability and the corresponding expected cost to the dealer are characterized. Optimal reliability program including the upgrade degree and PM policy is derived so that the expected total cost of the second-hand product to the dealer can be minimized. Numerical examples are utilized to illustrate the applicability of the proposed model. In addition, some practical implications from a sensitive analysis regarding the important parameters are elaborated. [ABSTRACT FROM AUTHOR]

For repairable items under the two-dimensional warranty, the manufacturer expenses warranty costs for rectifying the failures occurring over the warranty coverage. Preventive maintenance actions reduce the occurrence intensity of item failures, and hence the warranty cost resulted from corrective maintenance, but bring additional preventive maintenance cost. In this paper, we investigate a periodic and imperfect preventive maintenance strategy for an item covered by a fixed and combined base warranty and extended warranty region from the manufacturer׳s perspective. After the base warranty expires, the buyer purchases an extended warranty service contract from the same manufacturer for extra protection. Over the whole warranty coverage, the item failures are minimally repaired by the manufacturer at no cost to the buyer. The effect of preventive maintenance action is characterized by reducing the item׳s failure intensity proportionally to the maintenance degree at each preventive maintenance action. Then a mathematical model is proposed to derive the optimal preventive maintenance strategy so as to minimize the total expected warranty servicing cost to the manufacturer. A numerical example is presented to illustrate the application of the proposed model and evaluate the impact of different model parameters on the optimal solutions and the corresponding warranty servicing costs. [ABSTRACT FROM AUTHOR]