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Optimal Single Replacement Policy for Products with Free-Repair Warranty Under a Finite Planning Horizon

Abstract This paper investigates the optimal single replacement policy for products with free-repair warranty (FRW) under a finite planning horizon (FPH) from the consumer’s perspective. Within the planning horizon, the product is replaced once by a new product. During FRW, when the product fails, the failed product is rectified using minimal repair without any cost to the consumer. After FRW, any failure of the product incurs a fixed repair cost to the consumer. However, each failure incurs a fixed downtime cost to the consumer over the planning horizon. Under this maintenance scheme, the replacement of the product is investigated for two separate cases: before FRW and after FRW. Then, two cost models from the consumer’s perspective are derived and the optimal replacement policy is obtained such that the expected total disbursement cost is minimized. Finally, numerical examples are given to illustrate the features of the optimal replacement policy under various warranties and planning horizons.