Presentation a Model for Reducing Two-stage Expanded Warranty Costs Based on Customer Type Based on Consumption Rate

This paper examined a warranty model where after the end of the two-phase warranty period, an extra warranty period is provided to the customer. The two-phase warranty period is split into two sections; the first period is free replacement / repair warranty (FRRW) period and the other is period of Pro-Rata Warranty (PRW). If the product failure occurs during the FRRW period, the damaged product is repaired by the manufacturer free or replaced by a new product. If this failure occurs in PRW period, the manufacturer and the customer are both responsible for paying for the repair costs; and if the failure happens during the extended warranty period, only minimal repairs is made. As customer consumption rate differs in a given period, it is advisable to classify customers based on their rate of consumption before determining the type of warranty policy, which will reduce the cost of warranties. Then, for each type of customer, a maintenance policy are supplied. In addition, the percentage of low consuming customer (high-consumption) will be effective in the overall costs.