Optimization of post-warranty sequential inspection for second-hand products

This paper considers an optimal sequential inspection schedule for a second-hand product after that the free nonrenewable warranty is expired. The length of warranty is pre-specified and during the warranty period, the product is minimally repaired by the dealer when it fails. Following the expiration of the non-renewing warranty, the product is inspected and upgraded sequentially a fixed number of times at the expenses of the customer. At each inspection, the failure rate of the product is reduced proportionally so that the product is upgraded. The product is assumed to deteriorate as it ages and the replacement of the product occurs when a fixed number of inspections are rendered. In addition, the intervals between two successive inspections are assumed to decrease monotonically. The main objective of this paper is to determine the optimal improvement level to upgrade the product at each inspection so that the expected maintenance cost during the life cycle of the product is minimized from the perspective of the customer. Under the given cost structures, we derive an explicit formula to obtain the expected maintenance cost incurred during the life cycle of the product and discuss the method to find the optimal level of the improvement analytically in case the failure times follow the Weibull distribution. Numerical results are analyzed to observe the impact of relevant parameters on the optimal solution.