COSTS ANALYSIS OF TWO-DIMENSIONAL WARRANTY FOR SECOND-HAND PRODUCT CONSIDERING UPGRADE ACTION

Nowadays, because of low financial ability of some of the buyers, saving natural resources and preventing unnecessary waste of energy and materials to produce new products, second-hand products have attracted extraordinary attention. Therefore, markets are divided into two parts, which are markets of new and second-hand products. Manufactures try to give peace of mind to customers regarding their products in order to capture more share of markets and customers satisfaction. An important factor in providing customer's peace of mind is warranty. This issue becomes more important regarding the second-hand products. Since customers are usually unaware of the product's past performance, dealers consider warranty and upgrades for these products until the customer does not doubt toward buying the product. Considering warranty and upgrade have the cost, make to increase the product's sale price, and make to increase the complexity of the model as a result, making decisions in such an environment is too complex also considering upgrade action will make to increase the second-hand product's reliability during the useful life of the product. Warranty period can be considered one-dimensional or two-dimensional. But because the dealer seek to calculate exactly the expected cost and the expected number of the product's failures during warranty coverage then warranty should be considered two-dimensional and the dealer calculates the cost of expected number of the product's failures during warranty coverage and adds it to the sale price of the product. Therefore, Upgrade action has increased the sale price of the second-hand product on one hand, has decreased the expected failures number of the product and the cost of these failures on the other hand. In this paper, an upgrade action carrying out on the product right before transferring to the customer, warranty is considered two-dimensional, as well as the expected cost of upgrade action and warranty coverage is calculated. At the end, a numerical example and sensitivity analysis is presented.