Optimal Price and Warranty Length for Profit Determination: An Evaluation Based on Preventive Maintenance
Warranty is a two-sided coin: on one hand, it results in additional cost to the producer, and on the other hand, it acts as a protectional tool for buyers. To deal with this additional cost (cost of repairing faulty items), preventive maintenance during t
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1 Introduction Due to rapidly evolving technologies, the global market is being flooded with various new products. For companies to sustain in today’s constantly changing business environment, they need to provide better services to their customers. Consumerism as a factor in the marketplace is an advent which will require increasing attention and adjustment on the part of producers wishing to maintain or improve their competitive situations in the face of expanding consumer awareness [1]. The intent of manufacturing organization is to strengthen their position in the market and to earn a maximum profit by increasing the sale of its product which can be achieved only if a customer is satisfied with the quality of their product. To increase the sales of a product and to distinguish it with a competitor’s product, warranty and maintenance serve as important marketing attributes for any organization. Murthy and Blischke [2] espoused two important roles of warranty. Firstly, warranty guarantees a protection against defective products for consumers and against excessive claims by customers for manufacturers and secondly warranty acts as a promotional tool for product differentiation by manufacturers. Within the marketing coverage, maintenance is commonly carried out for warranty service. Maintenance actions are classified into two strategies, which are corrective maintenance (CM) and preventive maintenance (PM). Preventive maintenance is used to control the deterioration process leading to failure of a system, and corrective maintenance restores the system to its operational state through corrective actions
A. Anand () • S. Singhal • S. Panwar • O. Singh Department of Operational Research, University of Delhi, Delhi, 110007, India e-mail: [email protected]; [email protected]; [email protected]; [email protected] © Springer Nature Singapore Pte Ltd. 2018 P.K. Kapur et al. (eds.), Quality, IT and Business Operations, Springer Proceedings in Business and Economics, DOI 10.1007/978-981-10-5577-5_21
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after a failure [3]. PM actions are scheduled actions and performed before the product fails. PM can be perfect which restores the product to “as good as new” state or can be imperfect, which restores the product to a state which lies between “as good as new” and “as bad as old.” Offering warranty also leads to the loss in revenue earned due to the cost of repairing the failed items over the warranty period. This loss can be minimized by providing preventive maintenance during the warranty period. Though by providing preventive maintenance, the manufacturer also incurs some maintenance cost. So, it is efficacious for the manufacturer to perform preventive maintenance only if the reduction in the cost of servicing the warranty is higher than the additional cost incurred with preventive maintenance. Preventive maintenance actions are executed either to lower the probability of a failure or to extend the useful life of the product. Consumer buying behavior analysis is a first
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