This section presents product reliability and product maintaining and their connection.
First, the term of reliability is introduced. Then maintaining a product is discussed. Fi-nally, different warranty risks are gone through.
1.7.1 Reliability
The reliability of a product means the product’s ability to perform its required function under given conditions. Reliability concerns the product warranty and furthermore prod-uct quality, and reliability failure represents quality failure at the same time. (Prabhakar Murthy & Jack, 2014, pp. 35-36)
Figure 6 - Reliability curve (Prabhakar Murthy & Jack, 2014, p. 34)
As shown in the figure above, product reliability typically decreases with age, and a new product’s reliability should be ideal 1 (or 100 %). Further on in this thesis this curve will be compared to the case company’s warranty claim amounts by time. If a component’s reliability is sufficiently known, it can be linked to the whole product’s reliability. How-ever, in this thesis case the production volumes are too low, and the product variety too high in order to gain information through these kinds of calculations. (Prabhakar Murthy
& Jack, 2014, pp. 35-36)
Product reliability can be divided into four segments, which are design reliability, inher-ent reliability, reliability at sale and field reliability. All of these are presented below.
(Prabhakar Murthy & Jack, 2014, pp. 35-36)
Design reliability is produced on the design table, where all of the significant choices about a product’s ability to work are done. Design decisions mostly define a product’s best possible reliability, and design quality requires resources and proficiency. (Prabhakar Murthy & Jack, 2014, pp. 35-36)
The inherent reliability of standard products that are manufactured in volume, may vary from the designed, because of assembly work variation or component non-conformance.
Even the most complicated project-designed products usually have some volume-pro-duced components which may affect their reliability. (Prabhakar Murthy & Jack, 2014, pp. 35-36)
Reliability at sale depends on the transportation and storage time, and the conditions prior delivering the product to the end-user. Mechanical load during transport may cause leaks to hydraulic couplings and hoses, and for example rainwater or dust might affect the op-eration of the electrical components, and even break them. (Prabhakar Murthy & Jack, 2014, pp. 35-36)
Field reliability is predicated by the environment, operational factors, operator (user) and the usage mode of the product. To exemplify, taxi cars can be well-maintained and wisely operated (always a warm motor and long distances to drive), therefore they can be in a better condition than others much less driven and younger cars of average consumers.
(Prabhakar Murthy & Jack, 2014, pp. 35-36)
1.7.2 Maintaining a product
Maintaining a product is important for product reliability. Usually product maintaining is defined in the warranty terms or the appendix, and it has to be properly performed to fulfill the warranty terms and keep the warranty valid. Product maintenance is divided into two segments: preventive and corrective, which are presented below. (Prabhakar Murthy & Jack, 2014, pp. 37-39)
Preventive maintenance is defined as preventive actions to control a product’s wear and tear, and the overhaul of a product so that it won’t break. Preventive maintenance includes maintenance in its entirety, tests and measurements which are performed to prevent fail-ures from occurring. Preventive maintenance reduces the likelihood of failure, which makes preventive maintenance vital in order to meet the presumed product quality level and warranty costs – especially in relation to products where the machines’ operating lifetime is long, and overhauling is needed. (Prabhakar Murthy & Jack, 2014, pp. 37-39) Corrective maintenance includes actions the purpose of which is to restore the failed sys-tem or product back into working state, and making sure that the known failures are the only ones, and the system won’t fail right after the restorative work. (Djamaludin &
Murthy, 2000, pp. 91-92) (Prabhakar Murthy & Jack, 2014, pp. 37-39) (Blischke &
Prabhakar Murthy, 2006, p. 168)
1.7.3 Warranty risks
Offering a warranty for a product involves risks, which should be observed while making the warranty decisions for a product. (LeBlanc, 2008) The following noticeable risks should be recognized:
1. Product quality is worse than expected
Offering a warranty for a product that fails more than expected causes financial losses for the business. A faulty prediction about product quality level causes similar effects to a business as a wrong estimation of repairing costs.
2. Product quality is better than expected
If a warranty is offered for a bigger amount of expected failures than actual, it gener-ates a higher profit for the business, and the business benefits of it (LeBlanc, 2008, p.
1). Thus when product quality is higher than expected, it would be wise to rethink the product warranty, and perform some recalculations. Perhaps the granted warranty pe-riod could be even longer in the future, in order to benefit of all the positive features of good quality.
3. Not offering a warranty although competitors do offer one
The decision not to offer a warranty although competitors do, may give a competitive advantage to the competitors, which may be decisive for the customers when making a choice. (LeBlanc, 2008, p. 1)
4. Offering a warranty without capability to handle warranty cases
Offering a warranty requires an infrastructure to handle warranty cases. (LeBlanc, 2008, p. 1) The warranty process flow has to be smooth for the customer, so that the customer’s process is interrupted with minimum possible loss. Offering a warranty without adequate capability to handle the possible warranty cases poses a risk for cus-tomer satisfaction and a company’s reputation.
5. Offering a warranty with overestimated warranty costs
Overestimating the warranty costs causes several problems for accounting and bid pricing. Product margin calculations could be totally out of scale, which causes com-petitive disadvantage. (LeBlanc, 2008, p. 1) Understanding the real costs of a warranty program helps to achieve business objectives.
6. Offering a warranty with under-estimated warranty costs
While overestimating the warranty costs causes too high unit bid price, under-estimat-ing the warranty costs will also cause discrepancy to the calculations. In that case, actual warranty costs may rise too high, which affects the product margin and business profitability. Making decisions about product pricing can be very harmful to the busi-ness, if the cost data is inaccurate or completely erroneous.
7. Other risks or uncertainties
The amount of warranty claims may be largely different than the number of actual breakups. The amount of warranty claims can be larger or smaller than actual, because every breakdown case doesn’t produce a warranty claim, and some warranty claims are actually issued without a real breakdown-under-warranty. Invalid claims occur outside of the warranty period, or from products which haven’t failed at all, or failure is caused by misuse of the product or lacking maintenance. However, a warranty claim issued outside of the warranty period still offers useful information on product reliability, especially if the claimed defect otherwise fits into the warranty terms. (LeBlanc, 2008, p. 2) (Blischke
& Prabhakar Murthy, 2006, p. 83)
Besides these various risks, assessing a novel product’s reliability is difficult because of the lack of information and user feedbacks. (Blischke, et al., 2011, p. 8) This increases the effect of all of the six risk types presented above. Similar results may occur if the warranty data is not well utilized; therefore even the highest amount of data can be nearly useless, if the data quality is poor or data handling is insufficient. This is one reason why this thesis is made.