Determination of production run time and warranty length under system maintenance and trade credits

Yu‐Chung Tsao

14 citations0/0 files storedInternational Journal of Systems Science

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Supply Chain and Inventory Management Reliability and Maintenance Optimization Management and Optimization Techniques

Abstract

Manufacturers offer a warranty period within which they will fix failed products at no cost to customers. Manufacturers also perform system maintenance when a system is in an out-of-control state. Suppliers provide a credit period to settle the payment to manufacturers. This study considers manufacturer's production and warranty decisions for an imperfect production system under system maintenance and trade credit. Specifically, this study uses the economic production quantity to model the decisions under system maintenance and trade credit. These decisions involve how long the production run time and warranty length should be to maximise total profit. This study provides lemmas for the conditions of optimality and develops a theorem and an algorithm for solving the problems described. Numerical examples illustrate the solution procedures and provide a variety of managerial implications. Results show that simultaneously determining production and warranty decisions is superior to only determining production. This study also discusses the effects of the related parameters on manufacturer's decisions and profits. The results of this study are a useful reference for managerial decision-making and administration.

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References

1986Economic Production Cycles with Imperfect Production Processes 1993A Consumer-Side Experimental Examination of Signaling Theory: Do Consumers Perceive Warranties as Signals of Quality?2003The optimal cycle time for EPQ inventory model under permissible delay in payments 2006A study on an inventory model for non-instantaneous deteriorating items with permissible delay in payments 2008An EOQ model with noninstantaneous receipt and exponentially deteriorating items under two-level trade credit 2007Dynamic pricing, promotion and replenishment policies for a deteriorating item under permissible delay in payments 2008Optimal manufacturer’s replenishment policies in the EPQ model under two levels of trade credit policy 1976Optimal Price and Protection Period Decisions for a Product Under Warranty

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2018An integrated inventory model with warranty dependent credit period under two policies of a manufacturer 2014Retailer's inventory system in a two-level trade credit financing with selling price discount and partial order cancellations

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