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Improvement of Warranty Management Using Logistics

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Published: Wed, 30 Aug 2017

Improvement of WARRANTY MANAGEMENT using logistics

  1. Abstract

The purpose for the paper is to build up a calculated system that incorporates the innovation and business issues ahead of schedule at the outline stage to limit warranty costs in the most compelling and effective way. These days, giving a decent post-buy benefit has turned out to be critical then the effectiveness of warranty administration programs is by all accounts urgent. On warranty administration programs through calculated bolster arranging. Beginning from a reference structure for warranty administration, the paper traces the part that the calculated support can play in expanding process productivity. Specifically, extraordinary angles are tended to, such as order of framework segments, meaning of repair levels and support errands. The introduced structure is alluded to the military business in which calculated methodologies are broadly connected. Regardless of this, proposed technique can be considered all around substantial and effortlessly pertinent to various setting.

  1. INTRODUCTION of Articles

Because of the increasing customer expectations, item exhibitions and qualities are no longer the sole perspectives to consider in a focused worldwide market. For buyer’s satisfaction product, must perform to their fullest. To achieve this performance, the part of post-deal administrations, especially amid warranty period becomes crucial so that an efficient warranty program represents a competitive asset. The administration of warranty is not simple task as it includes various parameters like technical terms, managerial issue and administration. During the warranty period, things must be kept up or reestablished to a state in which it can play out the required capacity, expected to give a given administration (Gonzalez Diaz et al. 2009). There are distinctive sorts of warrantys every one suited an alternate sort of item (purchaser, business and modern, standard versus custom-constructed, and so forth.) (Lyons and Murthy 2001, Menezes and Quelch 1990). A writing survey uncovers vital collaborations amongst warranty and different order (Gonzalez Diaz et al. 2009, Murthy and Djamaludin 2002, Murthy and Blishke 2005, Gonzalez Diaz and Crespo Marquez 2010, Murthy et al. 2004) affecting warranty effectiveness. Among every one of them, especially essential are the followings:

Outsourcing: warranty benefit or by and large, the after-deals branch of an organization, is generally one of the most defenseless to be outsourced because of its okay and due likewise to the way that, among other highlights, outsourcing gives lawful protection to such help administrations (Gomez et al. 2009).

Quality: a reliability and quality improvement of the product has not only an advantageous and favorable impact in front of the client; it also highly reduces the expected warranty cost (Chukova & Hayakawa 2004, Lutz & Padmanabhan 1998).

Maintenance: In some cases, amid the warranty period the maker still has a solid control over its item and its conduct. Furthermore, the normal warranty costs depend regularly not just on warranty necessities, yet, likewise on the related upkeep plan of the item (Yeh and Lo 2001, Dimitrov et al. 2004, Kim et al. 2004, Wu and Li 2007).

Costs: about cost estimation, there are nowadays methods to estimate accurately the final cost of a specific acquisition contract as, for instance, the “Estimate at Completion” (EAC) method (Christensen 1993), a management technique that can be used in a project for the control of the costs progress.

The paper addresses the problem of warranty management efficiency, for complex system such as a custom-built product where huge number segments and conditions must be considered. The paper is sorted out as takes after. In segment 2 a system for warranty administration is proposed, suggesting the utilization of settled strategies, coming from different disciplines, to improve process efficiency. In section 3 the main issues of warranty logistics are presented, whereas in section 4 the proposed methodology for the application of logistic support to warranty management is illustrated. Finally, conclusions and hints for further research are presented.


The proposed process for warranty management consists of four steps, following the PDCA cycle and principles of Quality Management Systems as per 9001:2008. The initial step of a warranty administration handle comprises in the meaning of nonspecific and destinations. This choice is central for the key detailing of warranty arrangements and it must consider alternate point of view. To stay away from inconsistencies between the warranty program and the general business system the utilization of the Balanced Scorecard (BSC) in this stage is suggested. Other useful methods to use during the planning phase are Criticality Analysis (CA) and Root Cause Failure Analysis (RCFA) to focus actions on those high impact specific failures showing rare and high failure frequency (González Díaz et al. 2011 a). study on reliability based design of a series-parallel system and used GA to obtain optimal values of system design, burn-in period for different lengths of warranty, PM intervals and replacement time. Deb (1999, 2001) and Hu et al. (2007) used multi-objective GA to solve the goal programming problems. Some of the literature also focused on achieving customer satisfaction through improvements in the warranty parameters by making changes in the design. Manna et al. (2006) and Maronick (2007) focused on maximization of customer’s utility in terms of warranty duration for the different warranty policies. The last stride of the procedure is warranty program change. Considering the extensive number of conceivable approach, the selection of Customer Relationship Administration and Six Sigma appear to be especially viable. Different devices that can be utilized for the change are identified with the usage of new innovations, for example, e-warranty methodologies, where e-warranty can be characterized as a warranty program bolster which incorporates the assets, administrations and administration important to empower proactive choice. This support not just incorporates e-innovations, additionally e-warranty exercises such as e-checking, e-conclusion, e-visualization, … and so forth.


Warranty and logistics literature is vast, the problem of logistics of warranty servicing has not been deeply analyzed (Murthy et al. 2004). Murthy proposes the following classification of strategic, tactical and operational issues concerning warranty servicing. (Table 1).

Strategic Tactical and operational

Location of material Spare part inventory

stocking points

Location of service centers Material transportation

Location of warehouses Replace versus repair

Demand for spares Scheduling of jobs, repairs

Service channels repairs and travelling repairman problem

In facing these issues, product characteristics are fundamental as for warranty polices. In this field, literature contributions are mainly related to commercial products, dealing with specific problems.

For example, Considering the replace or repair issue, there are numerous approaches to support this decision (Murthy & Nguyen, Jack & Vander Duyn Schouten 2000, Jack & Murthy 2001, Zuo et al. 2000). On these considerations, in this paper some of

the above mentioned tactical and operational logistics issues are discussed, focusing the attention on complex products which need to be maintained over their life. For these systems, such as military aircrafts, logistic support becomes a crucial part of the warranty management policy, considering characteristics of products and existent constraints, especially in the military field. Logistic support deals with provisioning, procurement, materials handling, transportation, distribution and warehousing of items and the support infrastructure needed for carrying out these activities over the life of the product (Murthy et al. 2004). According to this definition, it becomes clear how many aspects of a product logistic support influence the efficiency of a warranty management policy. Moreover, to this, an underlying support arrange, connected to the warranty time skyline, can give a first way to deal with warranty scope quantification, save parts provisioning, warranty assignment timetable, professionals’ aptitude levels and so on. Arranging and booking change connected to a warranty program can obviously improve the adequacy and proficiency of program approaches. Such change will rely on upon the time skyline of the examination. classification of critical components of the product which, due to their significance per several factors, deserve to be specially analyzed for the warranty management;

  1. choice of repair levels, which are those maintenance levels that are more effective to take the proper actions during the development of a warranty program;
  2. tasks definition which refers to those methods that define the maintenance and warranty tasks when a component, in a specific product, fails;
  3. required spare parts and allocation.

Above are the aspects which are concerned in this section reference models to guide the decision-making process.

3.1 Classification of components: –

In the definition of logistic support strategy particularly important is the identification of candidates, which are elements to be considered for the logistic support process. According to MIL-STD- 1388-2B logistic support candidates can be defined as follows:

  1. Logistic Support Full Candidate: components requiring that their logistic support is analyzed. The knowledge about the logistic support of crucial elements or parts of the product is highly relevant in order to plan, schedule, and organize a proper maintenance and warranty program.
  2. Logistic Support Administrative Candidate: these are components that do not require a complete analysis of their logistic support, but they are necessary to be taken into consideration to perform the complete analysis of full candidates. In other words, an administrative candidate is the one which must be manipulated in order to access other candidates of the product.

3.2 Repair Levels: –

Table 2. Repair levels (MIL-STD-1390D).

Repair level

Echelon 1

Echelon 2

Echelon 3

Echelon 4


C (crew)



H(Intermediate Rear)


Developed by the user. Preventive maintenance tasks by the operator

General changes for parts and adjustments. Preventive tasks and correction (e.g. duration4 man/hour)

In-place repair. Change of damaged assemblies. Preventive tasks and correction. (e.g. 4 man h. duration <=50-man h.)

General repair of damaged sets and subsets. Preventive tasks and correction, determined by maintenance manuals when duration 50 man/hours.






Table 3. Comparison between alternatives.


MTBF1 1000 1,000 1,000

MTBF2 1000 8,000 800

L (cost unit) 100 20 40

M (cost unit) 100 40 80

P (cost unit) 200 500 200

N 60% 60% 50%

The proposed system recommends an approach to assess what’s more, decide how and where a support or, then again warranty errand ought to be executed, to bear the cost of the most minimal cost. Utilizing the officially created documentation for the military part (Table 1), it is conceivable to characterize the levels or echelons at which different costs (direct labour, material, handling.) for the different maintenance echelon. Then, it is possible to minimize an objective function to determine which echelon is the most recommendable to face a repair. A fifth echelon related to reconstructions and major changes performed by the own industrial maintenance (overhaul)is sometimes considered we will analyse if it would be more economical to discard the faulty Camera, rather than repair it. For that intention. we will compare the relative value of a repaired Camera with the cost to buy a replacement (for this generic case, the possibilities in the market will be denominated as A, B and C):

Condition applied by the manager to take a decision:

If (MTBF2/MTBF1) • N < (L + M)/P, then discard.

  1. Nomenclature

MTBF1 = MTBF of a new Camera

MTBF2 = MTBF of a repaired Camera

N = Predetermined acceptance level (set by the company or contractor)

L = Labor required to repair the Camera

M = Material required to repair the Camera

P = Unit price of a new Camera


Computations Results:

A: 0.60 < 1.00

B: 0.48 > 0.12

C: 0.30 < 0.60


A: Discard

B: Repair

C: Discard

Basically, this simplified example shows that if the cost for the repair exceeds a given percentage of the cost of a new item, the decision should be to discard the failed item. A similar way can be followed to decide between the other repair levels

3.3 Task Definition: –

In writing, numerous techniques are portrayed to characterize upkeep and warranty task when part of particular item come up short. Considering the military industry, one possible approach is certainly the use of Reliability Centered Maintenance (RCM) (MIL-STD-1629 6A). In a warranty management context, RCM becomes a trustworthiness examination for the meaning of those undertakings to be performed amid the warranty time frame. The utilization of RCM procedure to characterize the warranty program can be effortlessly clarified considering a common RCM prepare which comprises of the taking after strides:

  1. Selecting systems and collecting information
  2. System boundary definition
  3. System description and functional block diagram
  4. System functions and functional failure
  5. Criticality analysis
  6. Task definition.

Within RCM, the criticality of a failure mode can be assessed by using the Safety Hazard Severity Code (SHSC) as catastrophic, critical, marginal and minor failure (already mentioned in section 3.1) or through a more quantitative assessment (MIL-STD-882):


-Cm (modal criticality number): it is calculated for each failure mode of each logistic support item.

-Cr (item criticality number): it is calculated for each logistic support item.

-λP (failure rate): it is usually obtained from fail-ure rate predictions (MIL-HDBK-217, RIAC 217 Plus).

-α (failure mode rate): It is usually obtained from failure modes database sources such as (RAC FMD-97).

-β (conditional probability): It is the analyst’s best judgment that the failure will occur, based on the item severity classification.

-t (mission phase duration): in military or aero-space sectors, it is an average data of the usual system functioning.

After the maintenance task, have been determined which is to be applies during warranty period next task comes which is to define task frequency.


TF = Task Frequency

MTBF (Mean Time Between Failure) = It indicates system reliability which is calculated using known faikure rate.

MTBM (Mean time between maintenance) = One of the categories of maintenance events contributing to the mean time between maintenance actions (MTBMA) value.

MTBMnd = (Mean Time Between Maintenance No Defect): One of the categories of maintenance events contributing to the mean time between maintenance actions (MTBMA

AOR= Annual Operating Requirements.

Once got the recurrence for a particular task, it is possible to decide the required extra parts. For that reason, it is important to know previ-ously the accompanying parameters:

  1. Task Frequency every Year and Product Unit (TF)
  2. Spares Quantity per Task (QT)

With these information, it is conceivable to acquire the Spare Parts Frequency every Year and Product Unit.

Considering an exceptionally complex framework, similar to the military flying corps or naval force, this information permits the definition of extra parts assignment in distribution centers of various echelons. In some cases, the whole logistic support process is outsourced to the manufacturer. In this context warranty program efficiency is sensibly affected by logistic decisions such as spare quantity and allocation. In fact, logistic support for military systems is usually carried out in strong collaboration with the manufacturer during the warranty period and longer. . An example of spare parts allocation and inventory management for military aircraft components can be found (Costantino et al. 2010).

  1. Summary

All through the paper different parts of proficiency identified with the change of the warranty management have been examined. After introducing most critical issues of warranty administration and proposing a system for its administration, it has been analyzed the logistic support applied to complex products and how this support can be focused to facilitate and improve the decision-making process. Furthermore, it has been indicated how segments ought to be repaired, deciding ideas as assignment recurrence and recognizing different levels of repair. Upgrades in warranty administration effectiveness, and in addition the ensuing increment in consumer loyalty, may speak to a key angle in a worldwide rivalry. About the logistic support applied to the warranty management, further research in this field should be focused on the calculation of different costs, combining warranty assistance and maintenance tasks once the warranty period has been expired (to possibly extend the warranty contract).

Another fascinating improvement could be the blend of RCM with CRM (Customer Relationship Management), considering this as a phase incorporated into the reference system proposed for the warranty administration. Moreover, the incorporation of RCM arrangements with an ERP framework (Enterprise Resource Planning) can enhance not just the meaning of new maintenance and warranty methodologies, additionally the development of constant change.

  1. References

Blischke, W.R. & Murthy, DNP, 2002. Case Studies in Reli-ability and Maintenance. Wiley, New York, (661 – xxiii).

Chattopadhyay G.N, Murthy D.N.P. 2000. Warranty cost analysis for second-hand products. Math Comput Modelling; 31(10-12):81-88.

Chattopadhyay, G. & Rahman A., 2008. Development of lifetime warranty policies and models for estimat-ing costs. Reliability Engineering and System Safety 93:522-529.

Christensen, D., 1993. Determining an accurate Esti-mate At Completion. National Contract Management Journal­ 25, 17-25.

Chukova, S. & Hayakawa, Y. 2004. Warranty cost analysis: non-renewing warranty with repair time. John Wiley & Sons, Ltd. Appl. Stochastic Models Bus. Ind. 20:59-71.

González Díaz V., Parra, C., Gómez J.F. & Crespo A. 2010. Reference framework proposal for the manage-ment of a warranty program. Proc. of EURENSEAM,

Congress Euromaintenance 2010, Verona, Italy.González Díaz, V. & Crespo Márquez, A. 2010. Book

Review: Reliability Engineering. Warranty Manage-ment and Product Manufacture (By Murthy D.N.P. &. Blischke W.R). Production Planning & Control: The Management of Operations, 1366-5871, Volume 21, Issue 7, 2010, Pages 720-721.

González Díaz, V., Gómez Fernández, J.F., Crespo Már-quez,. A. 2011. Practical Applications of AHP for the Improvement of Waranty Management, Journal of Quality in Maintenance Engineering (JQME), Emerald

Wagner, Stephan M.; Jönke, Ruben; Eisingerich, Andreas B. California Management Review. Summer2012, Vol. 54 Issue 4, p69-92. 24p. 3 Diagrams, 5 Charts. DOI: 10.1525/cmr.2012.54.4.69.


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