Collaborating product development and maintenance service: quality incentive with inspection and warranty strategies

Abstract

Service-oriented manufacturing has been a prevalent trend in integrating product collaborative development with maintenance service, whereas the final products are frequently trapped into severe quality defects lacking appropriate contracting incentives. This paper establishes a tractable framework investigating the alignment of inspection and warranty strategies to manage product quality throughout the R&D, manufacturing and usage processes. Specifically, the manufacturing effort is motivated by a cost-sharing contract provided by the researcher, who performs quality inspection upon receiving the final product. Subsequent maintenance service is predesignated for warranty period coverage that the cost is partially claimed for compensation from the manufacturer. Under both breakdown and preventive maintenance strategies, we elaborate and compare the optimal incentive intensities solving the equilibrium effort decisions and inspection accuracy. The results suggest that both R&D and manufacturing effort levels under preventive maintenance are slightly higher than that under breakdown maintenance scenario, while inspection accuracy contradicts conversely. The breakdown maintenance strategy is associated with a lower proportion of warranty costs borne by the manufacturer. For a sufficient long warranty period, the researcher is better off to conduct preventive maintenance periodically. Our study contributes to providing explicit implications to manage product development quality with adequate inspection and warranty strategies.