A new warranty policy for heterogeneous items subject to monotone degradation processes

Abstract

A new renewable warranty policy is suggested that increases the probability of its success and can decrease the corresponding costs for certain ranges of parameters. It deals with heterogeneous populations of items from two subpopulations (‘weak’ and ‘strong’) and is aimed at elimination and further replacement of weak items after screening at some optimal time. This elimination is performed when degradation described by the corresponding mixed degradation process reaches some optimally predetermined level. Probabilistic and cost analyses of the model are performed and the illustrative example is presented. It is shown that the proposed warranty policy with inspection outperforms the conventional one in a probabilistic sense. Furthermore, the proposed policy becomes economically beneficial especially when the additional penalty cost caused by a sudden failure is large.