A new warranty policy based on a buyer's preventive maintenance investment

For large equipment, we present a new warranty policy wherein the buyer invests in the preventive maintenance (PM) cost within the product's life cycle to reduce the losses from production downtime. We construct discounted cost decision models for both buyers and sellers based on different PM strategies within the product's life cycle. The win-win intervals were obtained under the condition that the buyer intends to invest in the PM costs and the seller intends to take PM actions. We also theoretically and numerically evaluate the effects of failure rates, various fees, discount factors, and PM strategies on the buyer's maximum PM investment and the seller's minimum acceptable PM investment under different PM strategies. The main results indicate that (1) if the win-win between the buyer and the seller was realized, then the seller must increase the PM efforts; and (2) the warranty policy presented herein is suitable for products with high failure rates, high maintenance costs, significant losses from downtime, and low PM costs. (C) 2017 Published by Elsevier Ltd.