On the investment in a reliability improvement program for warranted second-hand items

A reliability improvement program (such as an upgrade action) can be seen as an investment by a dealer to restore a second-hand product to a better operational state. Due to the nature of the actions performed, the item's reliability at the end of this program is usually uncertain. This article develops a stochastic cost–benefit model for investment made in reliability improvement programs for second-hand items sold with failure-free warranty. Depending on the product's lifetime modeling approach, two modifications of the model are considered and are solved for the optimal improvement level. A real case application of the model is presented to validate the proposed approach.