Warranty and preventive maintenance for non-repairable products with failure penalty postwarranty

For products sold with a warranty, preventive maintenance (PM) actions by either the manufacturer and/or the buyer has an impact on the total cost for both parties. In this investigation, we use a model to study the effect of PM carried out by the buyer on non-repairable items sold under a free replacement renewing warranty, and a penalty will be incurred by the buyer if the item fails before the end of its useful life during the post warranty. For the manufacturer, if the product fails during the warranty period, it shall be replaced by a new one, complete with a new warranty and at no cost to the buyer. Out-of-warranty, if the product fails before its useful life limit, the buyer will incur a penalty cost, the amount of which depends on the failure time. Under such a framework, the cost analysis of the three PM options is examined from the perspective of the manufacturer and the buyer, respectively. The results shows that a significant cost saving can be obtained by taking the optimal PM action route.