Warranty Policies: Analysis and Perspectives

Warranty is a topic that has been studied extensively by different disciplines including engineering, economics, management science, accounting, and marketing researchers (Blischke and Murthy, Warranty cost analysis. Marcel Dekker, New York, 1994, p 47). Warranty policy is a guarantee for the seller of a product to provide the buyer with a specific service, such as replacement or repair, in the event of the product failure. Today warranty policy is an important marketing factor used by the manufacturers and corporates to promote its product to consumers (Park and Pham, IEEE Trans Syst Man Cybern A 40:1329–1340, 2010). This chapter aims to provide an overview on warranties focusing on the cost and benefit perspective of various warranty and maintenance policies. After a brief introduction of the current status of warranty research, the second part of this chapter classifies various existing and several recent promotional warranty policies to extend the taxonomy initiated by Blischke and Murthy (Eur J Oper Res 62:127–148, 1993). Focusing on the quantitative modeling perspective of both the cost and benefit analyses of warranties, we summarize five problems that are essential to warranty issuers. These problems are: (i) what are the warranty cost factors; (ii) how to compare different warranty policies; (iii) how to analyze the warranty cost of multi-component systems; (iv) how to evaluate the warranty benefits; (v) how to determine the optimal warranty policy. A list of future warranty research topics are presented in the last part of this chapter. We hope that this will stimulate further interest among researchers and practitioners.