Dynamic Pricing and warranty Length optimization in product’s life cycle (A Case study in SANAM Electronic Company)

Document Type : Original Article

Authors

1 Industrial Engineering- TMU

2 Department of Engineering Management, TMU, Tehran, IRAN

3 Tarbiat Modares University

Abstract

Warranty is an important element of new products’ marketing. It is obvious that longer warranty length has direct effect on product’s demand, but it can increase manufacturer's costs. The problem of this paper is maximizing the profit of the manufacturer, which consists of a set of revenue and cost elements. Although, most of researches in warranty area just examine the decisions for under-warranty products, in this research we proposed a model considering the role of both under- and out-of-warranty products on manufacturer’s profit. For this, we propose a model for calculating the number of under-warranty and out-of-warranty failures in each spare part production period. The demand itself is dependent upon the time, sales price, and length of warranty. Sales price and warranty length are, respectively, inversely and directly proportional to the market demand. Therefore, the simultaneous decision about sales price and length of warranty is of considerable significance in order to maximize the profit. We solve the problem with the Particle Swarm Optimization and Optics Inspired Optimization algorithms. Through a systematic analysis and comparison, some interesting and valuable managerial insights are derived which are applicable for companies such as SANAM Electronic Company for which we test our proposed model.

Keywords

References

[1]    Murthy .D, Solem .o, and Roren.t, "product warranty logistics: issues and challenges," European Journal Of Operational Research, vol. 156, 2004, pp. 110-126.
[2]    Murthy .D. N. P, and Blischke .w. R, "strategic warranty management: a life-cycle approach," IEEE Transactions On Engineering Management, vol. 47, 2000, pp. 40-54.
[3]    Khodadad .H. S. H, Osanlou, Moshabaki .A, and Kordnaij .A, "designing customer profitability model for organizations:(case study of electronic industry in iran)," Management Research In Iran (Modares Human Sciences)", vol. 17, 2013, pp. 73-94.
[4]    Murthy .D. N. P, "product warranty and reliability," Annals of Operations Research, vol. 143, 2006, pp. 133-146.
[5]    Murthy .D, and Djamaludin .I, "new product warranty: a literature review," International Journal of Production Economics, vol. 79, 2002, pp. 231-260.
[6]    Vahdani .H, Chukova .S, and Mahlooji ,H. "on optimal replacement-repair policy for multi-state deteriorating products under renewing free replacement warranty", Computers & Mathematics with Applications, vol. 61, 2011, pp. 840-850.
[7]    Manna .D. K, "price-warranty length decision with glickman-berger model", International Journal of Reliability and Safety, vol. 2, 2008, pp. 221-233.
[8]    F. Mansoori, T. Abbasnejad, and h. R. Askarpour, "designing an agile supply chain network in terms of demand dependence on price," Modern Researches in Decision Making, vol. 2, pp. 179-206, 2017.
[9]    Glickman .T. S, and Berger .P. D, "optimal price and protection period decisions for a product under warranty", Management Science, vol. 22, 1976, pp. 1381-1390.
[10] Mitra .A, and Patankar .J. G, "a multi-objective model for warranty estimation", European Journal of Operational Research, vol. 45, 1990, pp. 347-355.
[11] Lin .P.-C, and Shue .l.-Y, "application of optimal control theory to product pricing and warranty with free replacement under the influence of basic lifetime distributions", Computers & Industrial Engineering, vol. 48, 2005, pp. 69-82.
[12] Huang .H.-Z, Liu .z.-J, and Murthy .D, "optimal reliability, warranty and price for new products," IIE Transactions, vol. 39, pp. 819-827, 2007.
[13] Wu .C.-C, Lin .P.-C, and Chou .C.-Y, "determination of price and warranty length for a gamma lifetime distributed product", Journal of Information and Optimization Sciences, vol. 28, 2007, pp. 335-355.
[14] Lin .P.-C., Wang .J, and Chin .S.-S, "dynamic optimisation of price, warranty length and production rate", International Journal of Systems Science, vol. 40, 2009, pp. 411-420.
[15] Kim .B, and Park .S, "optimal pricing, eol (end of life) warranty, and spare parts manufacturing strategy amid product transition", European Journal of Operational Research, vol. 188, 2008, pp. 723-745.
[16] Tsao .Y.-C, Teng .W.-G, Chen .R.-S, and Chou .W.-Y, "pricing and inventory policies for hi-tech products under replacement warranty", International Journal of Systems Science, vol. 45, 2014, pp. 1255-1267.
[17] Yazdian .S. A, Shahanaghi .K, and Makui .A, "joint optimisation of price, warranty and recovery planning in remanufacturing of used products under linear and non-linear demand, return and cost functions" International Journal of Systems Science, vol. 47, 2016, pp. 1155-1175.
[18] Darghouth .M. N, Ait-kadi .D, and Chelbi .A, "joint optimization of design, warranty and price for products sold with maintenance service contracts", Reliability Engineering & System Safety, vol. 165, 2017, pp. 197-208.
[19] Chien .Y.-H, and Chiang .C.-P, "optimal warranty length and selling price to maximize the profit", Advances in Technology Innovation, vol. 2, 2017, pp. 18-21.
[20] Chen .C.-K, Lo .C.-C, and Weng .T.-C, "optimal production run length and warranty period for an imperfect production system under selling price dependent on warranty period," European Journal of Operational Research, vol. 259, pp. 401-412, 2017.
[21] Lei .Y, Liu .Q, and Shum .S, "warranty pricing with consumer learning", European Journal of Operational Research, vol. 263, 2017, pp. 596-610.
[22] Nasrollahi .M, and Asgharizadeh .E, "pro-rata warranty pricing model with risk-averse buyers", Management Research in Iran, vol. 20, 2016, pp. 131-154.
[23] Eberhart .R. C, and Kennedy .J, "a new optimizer using particle swarm theory", in proceedings of the sixth international symposium on micro machine and human science, 1995, pp. 39-43.
[24] Kennedy .J, "particle swarm optimization", in encyclopedia of machine learning, ed: springer, 2011, pp. 760-766.
[25] Poli .R, Kennedy .J, and Blackwell .T, "particle swarm optimization," Swarm Intelligence, vol. 1, 2007, pp. 33-57.
[26] Du .K.-l. and Swamy .m, "particle swarm optimization," in search and optimization by metaheuristics, ed: springer, 2016, pp. 153-173.
[27] Kashan .A. H., "a new metaheuristic for optimization: optics inspired optimization (OIO)," Computers & Operations Research, vol. 55, 2015, pp. 99-125.

Files

Share

How to cite

Statistics