Prediction of Two-Dimensional Baseline Warranty Service Costs Using Monte Carlo Simulation

For complex and high-value products such as automobiles, manufacturers typically provide a warranty to assure customers of the product’s performance for a specific duration or level of usage. This type of contractual guarantee is often referred to in the literature as a two-dimensional baseline warranty, since it considers both calendar time and accumulated usage. During the warranty period, the manufacturer is responsible for covering the costs of service and repair when failures occur, which may impose a considerable financial burden if not properly anticipated. Therefore, accurately estimating the expected warranty cost is a critical issue for both operational planning and financial management. In this article, we address this concern by modeling the product failure process as a function of both time and usage. To capture the stochastic nature of failures, Monte Carlo simulation is employed, enabling the generation of realistic lifetime and usage scenarios. Furthermore, it is assumed that the service cost depends jointly on the age of the product at the time of failure and the usage level at that point. Based on this framework, the expected service cost over the baseline warranty period is derived. To demonstrate the practical applicability of the approach, a numerical case study is presented. The results indicate that the proposed method provides an efficient and reliable tool for predicting two-dimensional warranty costs, thereby assisting manufacturers in effective resource allocation and decision-making.

کلیدواژه ها:

Two-Dimensional Baseline Warranty ، Product Failure Process ، Monte Carlo simulation ، Service cost ، minimal repair