An important problem facing manufacturers in today’s competitive market is the determination of the warranty period of a product and its 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. As a result, offering warranty implies an additional cost to the manufacturer and this cost depends on the servicing strategy. For repairable items, the manufacturer is required to rectify all item failures through minimal repair, replacement, and imperfect repair should failures occur within the period specified in the warranty. We focus on a particular warranty repair strategy, related to the degree of the warranty repair, for non-renewing, two-dimensional, free of charge to the consumer warranty policy. We consider a rectangular warranty region and divide it into three disjoint subregions, so that each of these subregions has a preassigned degree of repair for a faulty item. Our main goal i to determine the subregions , so that the associated expected warranty servicing cost per item sold is minimized. Two-dimensional problem is effectively reduced to a one dimensional problem by treating usage as a random function of age. Key words: warranty, failure, Non Homogeneous Poisson Process , renewal process, usage rate, repair-replacement
