An important problem facing manufacturers in today’s competitive market is repair-replacement strategy for defective product in warranty period. A warranty is a assurance given by the seller at the time of sale that the product will perform its functio satisfactorily for a specified time period, which requires the manufacturer to rectify all item failure either through repair or replacement should failure occur within the period specified in the warranty. The cost of servicing a warranty usually depends on the type of repair performed under warranty policy and time. Although ''all minimal repair'' and ''all replacement'' policies without consider time value are easy to implement and analyze, they are not always feasible or practical. In repair–replace strategy, it is assumed that a repairable item can be repaired for many times and time values of money are not considered. Sometimes these assumptions are not feasible and failed items are not capable of having minimal repair for many times and ignoring time value. We focus on a repair– replace strategy by considering constraint on the number of minimal repairs and time value of money for the case of two dimensional warranty policies is discussed. The warranty region is defined in terms of age and usage and the warranty period is divided such that the proposed strategy minimizes the expected total warranty cost. A numerical example for the obtained model is also presented.
