Modeling and analysis of a warranty policy using new and reconditioned parts

Remanufacturing processes such as refurbishing and reconditioning can extend the life of a product returned from the field. This provides financial opportunities and allows manufacturers to engage in sustainable practices. However, the inability to access a sufficient quantity of reconditioned components from end‐of‐life products can force the concurrent utilization of new components. This paper deals with the determination of an optimal warranty policy where a mixture of new and reconditioned components are used to carry out replacements upon failure for products under warranty. A mathematical optimization model is developed to maximize the manufacturer's expected total profit based on four decision variables: the warranty length, the sale price, the age of reconditioned components, and the proportion of reconditioned components to be used. A numerical procedure is used to compute the optimal solution. Numerical results are provided and discussed to demonstrate the validity and the added value of the proposed approach. Copyright © 2016 John Wiley & Sons, Ltd.