Optimization Of Upgrade And Warranty Polices For Second-Hand Products

The reuse and recycling of end-of-life (EOL) products is an effective way to achieve sustainable development, which in turn boosts second-hand product markets. In recent years, offering warranty for second-hand products is becoming popular for dealers in order to satisfy the consumers' demands for post-sale protection. However, second-hand products often incur higher warranty servicing cost to dealers, since they usually have more breakdowns than new ones. To reduce the warranty servicing cost, dealers usually adopt reliability improvement actions, such as upgrade, overhaul, and remanufacturing, to slow down product degradation and reduce risk of failures.With the objective of profit maximization and warranty cost minimization, respectively, this thesis investigates the optimization of upgrade strategies for second-hand products under both one-and two-dimensional warranty policies. The major work done in the thesis is listed as follows:1. A joint optimization model of upgrade level and preventive maintenance (PM) policy is proposed for second-hand products sold with non-renewing free repair warranty. In which, a second-hand item is subjected to an upgrade action at the end of its past life; during the warranty period, PM actions are carried out when the age of the item reaches a pre-specified threshold value. Optimal upgrade level and PM policy are jointly determined so that the dealer's expected profit can be maximized. The structural properties of the optimal policies are investigated. Numerical results show that the dealer can gain higher profit by implementing both upgrade and PM actions when comparing to implementing either one of them, especially when the warranty period is long, the repair cost is high, and/or the item is unreliable.2. A pre-sale upgrade model is developed for repairable second-hand products sold with two-dimensional (2D) warranty policies. Two kinds of 2D warranty regions are considered, i.e., rectangular and L-shaped regions. The marginal approach is used to describe the effect of age and usage on product reliability by treating usage as a random function of age. The optimal upgrade policy is determined to minimize the dealer's total expected servicing cost. Analytical properties of the optimal solutions are also investigated. Numerical results show that the dealer can effectively reduce his total servicing cost by implementing upgrade action; besides, with the same warranty terms, the optimal upgrade level and the corresponding total servicing cost under the L-shaped policy are much higher than those under the rectangular policy.3. Bivariate approach is adopted to model product failures under 2D warranty, in order to overcome the drawbacks of usage rate approach. By using the bivariate failure modeling framework, this model can describe the effect of upgrade action on the past age and past usage of a second-hand product separately. On this basis, a new upgrade model is proposed for repairable second-hand products under 2D warranty. The optimal upgrade policy is determined to minimize the total expected servicing cost from the dealer's perspective. Moreover, a four-step approach is devetaped to provide dealers with useful guidelines on designing flexible warranty contracts with optimized upgrade policies for second-hand products.The contributions of this thesis lie primarily in the systematical investigation of upgrade strategies for second-hand products, and also in the new ideas upon modeling product failures, modeling upgrade actions and designing flexible warranty contracts. This research can assist the dealers in making decisions on optimal upgrade strategies for second-hand products, and also promote the development of warranty theory for second-hand products.