Two echelon-two indenture extended warranty distribution network under imperfect preventive maintenance policies

Nowadays, offering extended warranty is considered as a lucrative source of income from the perspective of the after-sale service providers. Meanwhile, the main concern is presence or absence of base warranty and strategies adopted by the manufacturer during this period. Moreover, extended warranty structure must be responsive and customer oriented, which not only control the services cost but also to handle the customers’ requirement in a timely manner. In this paper, an extended warranty distribution network is designed from the perspective of a third party (3P) for supporting multi-indenture products in conjunction with base warranty. The proposed network is two-echelon; in this regard, a depot repair center is considered as the first echelon and a number of operational repair centers are selected at the second echelon. In order to decrease the cost of maintenance and spare parts logistics, a novel imperfect preventive maintenance approach is established based on the concept of virtual age. The third party aims to determine the optimum level of spare parts for each component of products at each repair centers in a way that: (1) total expected backorders is minimized (2) total maintenance and retrieval costs of product components are controlled. For optimizing the proposed model, an exact hybrid solution approach regarding Branch-and-Bound algorithm and Variable Neighborhood Search is presented. The obtained results showed the presence of a base warranty on a product has more advantages for third parties even without preventive maintenance.