Development of sales profit optimization model with the consideration of warranty and final order - A case study in notebook computer

Due to short product life cycle (PLC) in the notebook computer industry, manufacturers or branders need to prepare enough quantity of spare parts for repairs or replacements after the PLC, which is the final order. But very often, the inventory of spare parts being either not enough or too much will cause various kinds of losses. Meanwhile, in these days, longer product warranty length can attract more people to buy products, but it will lead to more efforts to keep more quantities of spare parts for manufacturers or branders. In addition, the sale price of product is also an important factor to affect sales volume. Therefore, there is a trade-off phenomenon between warranty and price for sales volume. This study develops a mathematical model that includes two steps; one is to develop a profit optimization model that considers the trade-off phenomenon in order to find the best warranty, price and sales volume in the product life cycle; the other is to calculate the final order after PLC based on sales volume within the PLC and warranty length. This study uses notebook computer as an example to develop the above model. We believe that the model can serve as a planning tool to prepare inventory for the final order of products with different sales volume and warranty.