Optimising burn-in procedure and warranty policy in lifecycle costing

In this paper, an optimization model is developed to investigate the optimal burn-in time and warranty length of a product from a manufacturer´s perspective. It is assumed that the cost of a minimal repair to the component which fails at age t is a continuous non-decreasing function of t. Out-of-warranty, if the product fails before its useful life limit, it causes customer dissatisfaction and incurs a penalty cost for the manufacturer. The properties of the optimal burn-in time and optimal warranty policy are also given. We provide a numerical example to illustrate our results. A sensitivity analysis is conducted to evaluate the effect of model parameters on the optimal solution.