“Free replacement extended warranty” or “traditional extended warranty”: Optimal extended warranty selection strategy

Cao, Kaiying; Su, Yunyi; Xu, Yuqiu; Jia, Wang

doi:10.1002/mde.3586

Cited by 3 publications

(1 citation statement)

References 35 publications

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“…Tayeb et al (2018) study the problem of integrating periodic and flexible preventive maintenance and production scheduling for permutation flowshops. Cao et al (2022) investigate the impact of free replacement on the firm's operational decisions. The above maintenance service strategies are based on the one‐dimensional EW.…”

Section: Literature Reviewmentioning

confidence: 99%

Optimal maintenance service outsourcing strategy considering extended warranty service

Cao

Han

et al. 2022

Manage Decis Econ

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In recent years, extended warranty (EW) services are widely provided by brand firms.Given that third-party maintenance service providers have more maintenance cost advantages than brand firms, brand firms face the challenge of whether to enter the maintenance service market. To address the above challenge and issue, we develop theoretical models. The research shows that the cost coefficient of developing maintenance service plays a critical role in the optimal maintenance service operation strategy. And the base market sizes of the EW and the charged maintenance service have significant influences on the results. Moreover, we propose conditions for a win-win outcome. | INTRODUCTIONWith the increasing price competition of products, the profit space of firms has declined. To promote product competitiveness and help consumers to avoid risk, more and more firms have begun to provide extended warranty (EW) services that can bring considerable profits (Hsiao et al., 2010;Lam & Lam, 2001). Though the handsome profit brought by EWs, firms should bear the heavy cost of operating that bothers some firms. It is noteworthy that the warranty services cost of Tesla is $123 million in 2017 (Guajardo et al., 2016). In this context, though there are still many brand firms providing after-sales services by themselves, like Huawei, OPPO, and DJI (DJI, 2021;Huawei, 2021;OPPO, 2021), an increasing number of brand firms select a low investment and low responsibility way, that is, outsourcing.Outsourcing, as an efficient strategy, is widely used by majority brand firms and helps firms to avoid the heavy operating cost and to focus on their core competencies, such as Nike and Apple who outsource their production line. Besides production outsourcing, service outsourcing is particularly common nowadays, such as logistics service, pre-sale service, and after-sales service. Outsourcing aftersale services to the third-party service providers lowers the barrier of entering into the great potential EW market for some firms without enough resources and contributes to focusing on the core businesses for some giant firms by avoiding the huge costs of establishing and operating service networks and wasting limited resources (Kurvinen et al., 2016;Yoo et al., 2021). For instance, BMW outsources its warranty services to a third-party service provider (Esmaeili et al., 2014).And JD outsources the after-sales maintenance service of their brand "JD Manufacture" to a third-party service provider, Baixiubao (ITS, 2017). It also plays an important role in avoiding competition and improving the performance of the entire supply chain by allowing professionals to handle professional issues. On a whole, there is no doubt that the outsourcing after-sale services strategy is an efficient way to reduce the operating cost for firms. Besides, it is also a good way to improve service convenience.

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Section: Literature Reviewmentioning

confidence: 99%

Optimal maintenance service outsourcing strategy considering extended warranty service

Cao

Han

et al. 2022

Manage Decis Econ

Self Cite

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Optimal extended warranty strategy considering channel perception and endogenous quality

Zhang,

Gao

2024

Manage Decis Econ

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Extended warranties (EWs) are common in online sales, available from various providers. Manufacturers are typically perceived as better repairers, making their EWs more valuable than retailers'. We explore four cases: no provider (Model N), manufacturer‐provided (Model M), retailer‐provided (Model R), and dual‐provider (Model B). Initially, we analyze exogenous quality, then consider endogenous quality with variable failure rates (Models VN, VM, VR, and VB). While product demand is consistent, EW demand varies across models. Dual‐channel EWs (Model B/VB) maintain manufacturer EW demand but reduce retailer EW demand. They increase profits under exogenous quality but may not under endogenous quality.

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Outsourcing or in-housing: remanufactured product warranty of independent remanufacturer

Meng,

Xue,

Zhang

et al. 2024

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PurposeThis study attempts to determine the optimal pricing and warranty strategies for remanufactured products offered by independent remanufacturers (IRs). Specifically, it takes into account price competition and warranty service competition between the original equipment manufacturer (OEM) and IR, ultimately providing recommendations on the selection of warranty service modes for IRs.Design/methodology/approachThis study considers two warranty modes for IRs: in-housing and outsourcing. Based on game theory, this study identifies the conditions under which the warranty service for remanufactured product is outsourced to retailers in IR-remanufacturing mode. Furthermore, this study investigates how this strategic decision affects closed-loop supply chain (CLSC) operations by comparing the two modes in terms of profit, consumer surplus (CS), quantity and overall social welfare (SW).FindingsFirstly, the provision strategy for IRs' warranty on remanufactured products depends mainly on the retailer’s warranty cost. If retailers have lower costs for warranties, IR opts to outsource the remanufactured product warranty to the retailer. Second, when retailers offer warranties at a lower cost, IRs prefer outsourcing remanufactured product warranty to retailers. In this way, it will maximize both the remanufacturer’s and retailer’s profits while achieving the optimal total profit for the entire supply chain. However, it’s not beneficial for the OEM. Third, the IR’s preference for warranty service provision strategy is influenced by customers’ acceptance of remanufactured product, customer sensitivity toward remanufactured product warranty and economies of scale in warranty service.Practical implicationsThe findings offer operational insights into IR decision-making in selecting warranty service provision strategies for remanufactured products.Originality/valueThis study is among the first to examine warranty provision strategy for IRs in CLSC.

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“Free replacement extended warranty” or “traditional extended warranty”: Optimal extended warranty selection strategy

Cited by 3 publications

References 35 publications

Optimal maintenance service outsourcing strategy considering extended warranty service

Optimal maintenance service outsourcing strategy considering extended warranty service

Optimal extended warranty strategy considering channel perception and endogenous quality

Outsourcing or in-housing: remanufactured product warranty of independent remanufacturer

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