Chapter List

17.1 Introduction

All products are unreliable in the sense that they fail. A failure can occur early in an item s life due to manufacturing defects or late in its life due to degradation that is dependent on age and usage. Most products are sold with a warranty that offers protection to buyers against early failures over the warranty period. The warranty period offered has been getting progressively longer. For example, the warranty period for cars was 3 months in the early 1930s; this changed to 1 year in the 1960s, and currently it varies from 3 to 5 years. With extended warranties, items are covered for a significant part of their useful lives, and this implies that failures due to degradation can occur within the warranty period.

Offering a warranty implies additional costs (called warranty servicing costs) to the manufacturer. This warranty servicing cost is the cost of repairing item failures (through corrective maintenance (CM)) over the warranty period. For short warranty periods, the manufacturer can minimize the expected warranty servicing cost through optimal CM decision making. For long warranty periods, the degradation of an...