Abstract: Warranty is a powerful marketing tool for the
manufacturer and a good protection for both the manufacturer and the
customer. However, warranty always involves additional costs to the
manufacturer, which depend on product reliability characteristics and
warranty parameters. This paper presents an approach to optimisation
of warranty parameters for known product failure distribution to
reduce the warranty costs to the manufacturer while retaining the
promotional function of the warranty. Combination free replacement
and pro-rata warranty policy is chosen as a model and the length of
free replacement period and pro-rata policy period are varied, as well
as the coefficients that define the pro-rata cost function. Multiparametric
warranty optimisation is done by using genetic algorithm.
Obtained results are guideline for the manufacturer to choose the
warranty policy that minimises the costs and maximises the profit.