A methodology for system warranty economic analysis

The author presents a methodology for computing the cost-effectiveness of a warranty in terms of the life-cycle cost of a system with and without a warranty provision. As with any estimate involving future activity, this methodology involves the assessment of risks. It relates warranty costs directly to system or equipment development, design, test, and production costs and the probabilities and risk involved in the redesign, retest, and retrofit required if the system or equipment does not measure up to warranty requirements. The methodology assesses the cost and/or risks involved from the viewpoint of the manufacturer who must ultimately warrant the system. It also provides a means for military procurement managers and engineers to develop the warranty segment of the system-procurement strategy