Condition-based maintenance policies for equipment sold with performance availability-based warranties

Abstract

Performance-based warranties are widely used, but existing warranties have not adequately considered the customer’s need. Therefore, we propose a novel metric, performance availability, which represents the equipment’s ability to maintain a high-level performance. We integrate this metric into the terms of the warranty contract and propose a condition-based maintenance policy for the manufacturer. We find that: (i) The warranty policy proposed in this paper is beneficial to customers. As the performance availability threshold increases, the average availability and average performance availability both increase accordingly. (ii) In the warranty scenario of this paper, the optimal policy under dynamic PM thresholds is a control-limit policy that outperforms traditional policy under a fixed PM threshold in reducing the manufacturer’s expected maintenance cost. (iii) Overall, the PM thresholds at each inspection point increase with the rise of the performance threshold and each PM cost, but decrease as the performance availability threshold and the penalty cost per unit time increase.