TY - JOUR
T1 - Final purchase and trade-in decisions in response to a component phase-out announcement
T2 - a deterministic analysis
AU - Cole, Dwayne
AU - Kazaz, Burak
AU - Webster, Scott
PY - 2015/7/4
Y1 - 2015/7/4
N2 - We investigate a problem faced by a durable goods manufacturer of a product that is no longer manufactured but still under warranty. A supplier announces that a component of the product will be phased out and specifies a deadline for the final order. A common response in traditional practice is to place a final order sufficient to cover future warranty claims. We analyse and compare this policy with two policies that use trade-in programmes to supplement the final order quantity: (i) A full trade-in policy where the firm issues a one-time offer to the entire population that has the product under warranty, and (ii) a matching trade-in policy where the firm issues a trade-in offer to a fraction of the warranty population in each period. Our analysis of a deterministic model leads to two main conclusions. First, we find that the savings from the use of a trade-in programme can be significant, and we identify easy-to-estimate measures that drive the magnitude of savings. Second, we find that a full trade-in policy is likely to be preferred over a matching trade-in policy. The policy is also easier and more practical to implement. However, if uncertainty in warranty demand is introduced, then a firm may benefit by combining elements of both policies – an initial offer to a sizable fraction of the warranty population followed by periodic offers to remaining segments over time.
AB - We investigate a problem faced by a durable goods manufacturer of a product that is no longer manufactured but still under warranty. A supplier announces that a component of the product will be phased out and specifies a deadline for the final order. A common response in traditional practice is to place a final order sufficient to cover future warranty claims. We analyse and compare this policy with two policies that use trade-in programmes to supplement the final order quantity: (i) A full trade-in policy where the firm issues a one-time offer to the entire population that has the product under warranty, and (ii) a matching trade-in policy where the firm issues a trade-in offer to a fraction of the warranty population in each period. Our analysis of a deterministic model leads to two main conclusions. First, we find that the savings from the use of a trade-in programme can be significant, and we identify easy-to-estimate measures that drive the magnitude of savings. Second, we find that a full trade-in policy is likely to be preferred over a matching trade-in policy. The policy is also easier and more practical to implement. However, if uncertainty in warranty demand is introduced, then a firm may benefit by combining elements of both policies – an initial offer to a sizable fraction of the warranty population followed by periodic offers to remaining segments over time.
KW - inventory management
KW - reverse logistics
UR - http://www.scopus.com/inward/record.url?scp=84935440296&partnerID=8YFLogxK
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U2 - 10.1080/00207543.2015.1061225
DO - 10.1080/00207543.2015.1061225
M3 - Article
AN - SCOPUS:84935440296
SN - 0020-7543
JO - International Journal of Production Research
JF - International Journal of Production Research
ER -