Comparative studies of three types of products (remanufacturing, refurbished and new products) on warranty cost and profitability

Abstract Employing remanufactured and refurbished products are among the new strategies that companies used to raise their profits as well as protects environment. Although used product equipment gives an opportunity to purchase latest technology, customers are doubtful about quality and reliability of these products. Because of limitation that developing countries faces in buying new products, some countries let companies to deal remanufactured and refurbished product just only under some strict requirement for warranty and servicing. In this paper, we aim to determine the effect of choosing remanufacturing and refurbished strategies on warranty cost and company’s profitability. The warranty cost has estimated by existing model in literature and all products considered under FRW warranty policy. Comparing the result of profitability between used and new products is our ultimate outcome. For this purpose, the failure data of 60 medical devices of a leading company has analyzed from 2012 to 2013. For each strategy (remanufacturing, refurbished and new products), 10 devices were selected and monitored over a year. The result shows that remanufacturing strategy causes reasonable warranty costs and profitability. This help manager to have a deep understanding, and decide on the profitable strategies leads to improve their competitiveness.