Engineered Systems Applications

Warranty & Cost

Warranty Claims Modeling and Cost Analysis

Warranty & Cost

GoldSim provides a framework for evaluating the entire life-cycle cost for a product, including warranty claims. Traditional methods of warranty analysis typically focus on evaluating warranty claims data to spot trends and incorporate feedback into the next product version. Using GoldSim's Financial and Reliability Modules, you can directly simulate the entire product life-cycle from design to production to operation and long-term support and maintenance.

By integrating a financial model (that addresses both costs and revenues) with a quantitative reliability model, you can forecast how well a product will perform in deployment, and then make design decisions and/or devise warranty strategies to minimize costs and best serve customers. Such a model is of particular value when there is significant uncertainty regarding a product's performance (e.g., prior to obtaining any actual statistical information on component performance).


Such a model can help you to:

  • More accurately predict liabilities associated with future warranty claims.
  • Establish whether sufficient testing has been carried out.
  • Identify the most likely and costly warranty events during the design phase, and modify the design accordingly.
  • Optimize warranty policies for maximum financial performance.
  • Properly set customer expectations as to what they can expect from a new product and how it should be used.
  • Increase efficiency of support logistics (e.g., optimum stocking of replacement parts or deployment of field personnel).
  • Create cost models illuminating the trade-offs between design, service, and warranty policies, thereby improving a company's overall warranty system and competitive position.

GoldSim models can be used to answer "what if" questions such as these:

  • "Our competitors just raised their product warranty from 3 years to 5. If we do the same, how much more warranty costs will the product line incur? If we don't, how many sales (and how much profit) will we lose from reduced market share?"
  • "Our company must be able to accurately state its financial exposure to its warranty obligations in the next 10K filing. What will our likely warranty obligations be for the next 12 months?"
  • "If we increase product reliability at an additional cost of $X million, how much will that increased marginal product reliability save in warranty costs?"
  • "What critical parts need to be stocked in field offices?"
  • "If we replace a 10 cent part that fails in one out of 5000 installations with an 18 cent part that fails in one out of 20000 installations, how will the increased unit cost compare to the reduced warranty costs?"
  • "Given a new product with no historical data, yet incorporating 60% parts of a previous design with good historical performance data, should the company play it safe and offer only a one year warranty, or can the company reasonably offer a three year warranty for enhanced market position?"


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