To ensure the sustainability, industries have to move forward to product recovery strategies. Reuse is one of the most efficient strategies as it preserves natural resources while maintaining the functional properties of the product. To alleviate the concerns over the quality at the end of first life, laws are enacted to protect the consumers through mandatory warranty requirements. Offering warranty results in additional costs, this cost might be reduced through upgrade that improves the reliability of the item. Considering the age at the end of first life as stochastic, this paper proposes a profit model, relevant costs like upgrade and the minimal repair during the warranty period are included. Optimal upgrade level and warranty length are jointly derived so that the expected profit per used item for the producer can be maximized. Algorithm to search for the optimal solution is developed for a special case. Numerical examples are utilized to demonstrate the feasibility of the proposed approach and the sensitivity analyses regarding the important parameters that might impact the profit.
Reliability Engineering and System Safety 119, pp.172-177