The importance of system quality has been increasingly emphasized in the past several decades. In 1987, Malcolm Baldrige National Quality Award (MBNQA) was established to promote quality awareness. Since then, more than 1,100 organizations have applied to the award. One way to measure system quality is by warranty cost. In the automobile industry, for example, warranty costs account for 3–4% of revenue. This paper proposes a framework for managing the warranty cost by setting a target warranty cost for the system and then allocating it to system modules in the conceptual design stage. In the proposed framework, engineers begin by constructing a knowledge-base of past warranty costs. Then regression analysis is used to set the target warranty cost of the new system, and Quality Function Deployment to allocate the target warranty cost to system modules. If detailed design becomes available, engineers can then compare estimated warranty cost with the target and decide whether to further improve reliability or reduce risk of system failure. This paper demonstrates the proposed methodology by using printers as an illustrative example.

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