I. Djamaludin et al., QUALITY-CONTROL THROUGH LOT-SIZING FOR ITEMS SOLD WITH WARRANTY, International journal of production economics, 33(1-3), 1994, pp. 97-107
Due to manufacturing variability, a fraction of the items produced are
non-conforming - i.e. they do not meet the design specifications. The
performance of a non-conforming item is inferior to that of a conform
ing item which meets the design specification. When items are sold wit
h warranty, the warranty cost to service non-conforming items is much
bigger than that for conforming items. The production of non-conformin
g items can be controlled through lot sizing. Smaller lot size results
in a reduction in the warranty cost per item but this is achieved at
the expense of increased manufacturing cost per unit. In this paper, w
e discuss the optimal lot sizing which achieves a proper trade-off bet
ween the two costs for repairable items sold with free replacement war
ranty (FRW) policy.