The Effect of Lifetime Buys on Warranty Repair Operations

Lifetime buys are a common practice in the electronics and telecommunication industries where all repair parts inventory is procured in one order to support the spare part needs of a product for the duration of its warranty repair period. Lifetime buy decisions are driven by product lifecycle dynamics and manufacturer-supplier relationships. In this paper we consider a repair operation in which defective items under warranty are returned to a manufacturer who either repairs them using spare parts inventory or replaces them with a new product. The manufacturer has a single opportunity at the end of the production period to procure spare parts inventory from his supplier. The manufacturer must decide the initial order quantity of parts and determine when returned products should be repaired using this inventory or replaced with new products. We show how fixed repair capability costs, variable repair costs, inventory holding costs, and replacement costs affect a firm