Field-Failure and Warranty Prediction Based on Auxiliary Use-Rate Information

Assessment of risk due to product failure is important both for purposes of finance (e.g., warranty costs) and safety (e.g., potential loss of human life). In many applications a prediction of the number of future failures is an important input to such an assessment. Usually the field-data response used to make predictions of future failures is the number of weeks (or another unit of real time) in service. Use-rate information usually is not available (automobile warranty data are an exception, where both weeks in service and number of miles driven are available for units returned for warranty repair). With new technology, however, sensors and smart chips are being installed in many modern products ranging from computers and printers to automobiles and aircraft engines. Thus the coming generations of field data for many products will provide information on how the product was used and the environment in which it was used. This article was motivated by the need to predict warranty returns for a product with multiple failure modes. For this product, cycles-to-failure/use-rate information was available for those units that were connected to the network. We show how to use a cycles-to-failure model to compute predictions and prediction intervals for the number of warranty returns. We also present prediction methods for units not connected to the network. To provide insight into the reasons that use-rate models provide better predictions, we also present a comparison of asymptotic variances comparing the cycles-to-failure and time-to-failure models. This article has supplementary material online.