Creating Competitive Advantage through Efficient Warranty Management

Transcription

1 White Paper Creating Competitive Advantage through Efficient Warranty Management Author - Abhijit Ghaskadbi, Head Automotive Manufacturing Haripriya V, BPM Consultant Abstract As manufacturing companies cope with pressures of competitive pricing and providing differentiated products with new features and functionalities, warranty excellence has become a key competitive advantage. It is becoming increasingly important for organizations to invest in solutions that help streamline operational warranty and use analytics to improve product quality. This paper emphasizes the importance of streamlining and improving the operational warranty process to provide superior cost benefit and increase customer experience and satisfaction. Automation of Warranty Management through various tools has become vital for discrete and automotive manufacturing companies, having B2C (business to customer) connect. Early warning detection analytics and component traceability are essential for the product improvements and to ensure that inferior products do not reach market.

2 Introduction Operational Warranty identification of root cause of failure. A multidisciplinary approach involving the In the Automobile industry, a warranty The challenges faced while managing participation of several internal claim is created when a vehicle is brought warranty departments including production, quality, into a workshop or a product is returned services, product development as well to a service center with a defect that is There are several operational challenges external supplier is needed to resolve and covered under a valid warranty contract. that manufacturing companies face while fix most warranty issues. It takes several For the company issuing the contract, managing warranty issues that months for this process to run its course warranty is a cost and directly impacts significantly impact warranty costs, during which time defective parts and the company's bottom-line. However, customer satisfaction and response products continue to be produced there are significant saving opportunities times. Foremost amongst these are the impacting attempts to manage/contain if the warranty process and operations following: warranty costs. are managed properly and important Long processing time of warranty claims: information is gleaned from the warranty Fraudulent Claims Management: This significantly impacts customer data. This can help improve product Manufacturers lose significant revenue to satisfaction with a company's products. quality as well as reduce warranty outlay fraudulent claims with more than 10% of Hi- tech industry have the best response for future products. warranty costs attributable to fraudulent time around 2 days while Automotive claims. Warranty is a significant cost for most companies slack with claims up to 2 manufacturing companies. For Original weeks. Supplier cost recovery: OEMs face Equipment Manufacturers (OEMs) the significant challenges in recovering Regulatory requirement: Escalating long term average for warranty costs has warranty costs from suppliers. For regulatory requirement and evolving reached up to 4-5% of the sales revenue. industries like automotive, OEMs end up standards poses another challenge both Warranty costs are thus a significant bearing more than 80% of the warrant from a reporting and documentation drain on the company's bottom line. The costs with suppliers around 10%. perspective as well as from managing the long term average impact of warranty cost of warranty administration. The costs for automotive suppliers has been Reverse logistics: For effective root TREAD Act (Transportation Recall 0.5-1% of their sales revenue. A cause analysis, reduction of warranty Enhancement Accountability and reduction in warranty spending directly processing time as well as supplier cost Documentation) is a well known example improves the company's cash flow. recovery there is need for managing the of a regulatory requirement from the reverse logistics process, to get the The following are the business factors National Highway Traffic Safety defective parts back from the customer that are making change imperative and Administration (NHTSA) in the US. to the manufacturer important: Traceability requirements: Identification Increasing Extended Warranty Sales: - Increasing use of complex of the root cause of failure, requiring the The sale of extended warranty represents technologies in the manufacturing of ability to trace a part and the a significant source of services revenue products identification of a supplier and supplier lot for many manufacturing organizations. is also becoming increasingly important Many organizations attribute this to - Increase in demand for from a regulatory and cost management contribute to more than 20% of their differentiated products by the perspective. services revenues. customers. Quality of warranty data: Warranty data - Customers asking for low cost is often untimely, inaccurate and lacks products critical contextual information to eliminate - Increase in global product platforms and resolve quality and product related issues. This contributes significantly - Higher claim volume from emerging towards identification of root cause of markets failure. - Decrease in cost & time to market for enhancements Absence of integrated approach: There is a need for an integrated approach to Warranty Management for the

3 Warranty Analysis for continuous improvement It is often said that nothing in business can be improved if it cannot be measured and warranty analysis is no exception. The application of performance management techniques and technologies to the monitoring of Key Performance Indicators (KPI) is very critical. Many corporate measures and performance indicators are not tied to the decisions that affect them. For Decision Management to work the business must understand how specific decisions create or destroy value and must link these decisions to the business and individual performance metrics being tracked. Most organizations use KPIs extensively to measure performance at both a corporate and a departmental or individual level. Mapping decisions to KPIs will enable people to focus on the decisions that matter. It is typically clear that decisions will impact one or more KPIs. For example, the effectiveness of the claims adjudication decision in correctly identifying those claims that can be automatically processed makes a material contribution to this KPI. Ensuring that decisions are mapped to a KPI (or to more than one) and that all the KPIs have at least one decision that impacts them is crucial. Proactive trend to alarm on Threshold of 4% for ABC Trucks- Should have been caught in the month of Sept Early detect and alarml. ABC Trucks Cause % contribution to 18.36% May 2 K T M B S Q D G J 7% 13% 16% 49% - Drill Down to show Cause #2 - Accounts for 49% of 18.36% claim. - Absolute value of Cause#2% is % Proactive Trend to alarm on Threshold of 2% for ABC Trucks against Cause # 2- Should have been caught in the month of Sept Cause #2 accounted for % of all claims at peak in May 2013 Figure: A Typical Warranty Analytics Dashboard

4 It is also necessary to monitor the as well as any abnormal diagnostic codes developing solutions leveraging M2M performance, throughput and basic captured by the device are uploaded using capabilities within the organization and statistics of decisions. The number of the network provided by a telecom the partner ecosystem. Examples of decisions made to approve, reject or network provider to a server in the cloud solutions that have been developed and refer, is a measure of decision at a predefined interval of time. successfully used by its customers effectiveness. High referrals will increase include the Telematics communication the burden on the staff doing manual At the most basic level the device unit and middleware platform for a Vehicle reviews. Higher Rejections will impact monitors various vehicle level parameters Diagnostics Solution which captures the customer service or sales. Similarly, and can be used to alert the driver if vehicle data in real time, a solution for decisions that take too long or that cost certain vehicle conditions are noticed. Electric Vehicle Monitoring as well as a too much may have a negative overall Examples of such conditions could include: M2M solution for Remote Asset impact. Tracking and reporting this Management used for monitoring field - Alerting the driver of a battery information will help the business owners problem for example, the battery equipment like diesel generator sets or understand and manage their decisions can only hold 60% of charge or does equipment in remote areas. more effectively. not charge fully TechMahindra Success story To manage change, companies can - Alerting the driver of low tire constantly challenge the way a decision is Implementation Snapshot pressure made to see if the approach being used An Integrated Warranty Solution is being remains valid. Improving decisions over - Alerting the driver that the next implemented successfully, on a global time, given changing business service is due scale for an Auto major that was looking constraints, ensures that optimal decision - Alerting the driver of low fluid levels ( for an approach to standardize its global making becomes the norm. Engine oil, Brake fluid, Radiator warranty processes through a flexible Our Warranty Analysis Solutions such as coolant, Transmission fluid) solution that could result in substantial EnterpriseXpert can help continually reduction in warranty expenditure. Tech improve decisions based on warranty The data can be monitored for abnormal Mahindra engaged with the customer operations. We can build Warranty vehicle parameters identified by pre- right from the gap analysis and product Analysis frameworks or complete defined Diagnostic Trouble Codes (DTC evaluation stage to the successful phased solutions for Warranty Analysis. codes). The driver of the vehicle can delivery stage, by utilizing an end user subscribe to a service where these DTC experience driven iterative model. RealTime Analytics codes are monitored by the OEM or his / her designated dealership. The dealer can The BPM solution has key components With the advent of IoT (Internet of Things) use the data on the server which may such as process automation, complex it is becoming increasingly possible to be ignored if the condition is transient and business rules, integration to monitor products in real time with the not indicative of an impending failure or downstream systems and dashboard intent of providing timely alerts to the inform the driver to schedule a service reporting and analytics for seamless user of the product as well as the product event if the DTC codes indicate there is a processing of claims. manufacturer. M2M (Machine to need for urgent attention. The OEM can Machine) communication technologies The Customer Landscape and Program run analytics across model / make / are leveraged to acquire and analyze data Drivers platform to serve as an early warning of products being used in the field across system of problems that may be indicative The customer had multiple systems to numerous industry segments. of a systemic defect in the vehicle either handle end- to- end claims and varied caused by manufacturing error or an The adoption of this technology is processes across regions that did not error in design. becoming increasingly evident in the provide the required level of flexibility and Automotive Industry which is looking to agility required to achieve high TCO. They The availability of such a service not only leverage Vehicle Telematics as a way of were looking for standardized global helps the OEM alert the driver of potential alerting the driver of potential failures. A warranty systems that could handle the issues pertaining to the vehicle but also telecommunication unit is fitted into the complete claims processing to improve act as a tool for customer experience vehicle CAN bus either as an Original the warranty experience for dealers and management and is seen as a major area Equipment Manufacturer fitted device or customers. of investment by car manufacturers. an aftermarket device connected to the The supply chain consisted of 11,000 OBD 2 port. Vehicle performance data Tech Mahindra has been successful in dealers worldwide, a 100+ dealer service

5 providers, 20+ parts return centers and A case management based global system Key Benefits millions of end consumers, with is being implemented to standardize the - processes and policy complexities across common global processes on disparate $53M saved in annual operating 11+ core systems, 26 downstream legacy platforms, while providing for costs applications, integration with 50 regional specialization for compliance and - 400% improvement in speed of interfaces, using 29 languages. other geo-specific requirements. The execution unified set of warranty data to create and Tech Mahindra Approach and Solution track compliance to programs like pre- - Global consolidation of warranty cost Tech Mahindra's BPM and domain approvals, recalls, parts return, root - cause analysis of the failure, corrective Reduced warranty spend (reduction consultants helped the customer action and integrated dashboards for in fraudulent claims/incorrect compose their vision in a phased manner reporting and monitoring, contributed to claims) to achieve a quick ROI. improvements in customer service and - Reduced IT infrastructure costs Comprehensive rules harvesting exercise product quality. from the legacy mainframe applications - Vehicle design improvement was completed to progressively build a - structured, cross referenced rules Dealers can provide real time catalogue that formed the foundation of feedback during processing of claim the process improvements for the - Ensuring the right amount is paid for transformation exercise. a claim Conclusion The business case for warranty improvement is persuasive. If companies having above billion dollar revenue can save on warranty spend even by % of sales through the techniques and tools discussed in this paper, they should be able to significantly improve margins and drive higher customer satisfaction. Both operational warranty and early detection analytics are key areas companies should look into so as to impact spend on warranty. Additionally, warranty management and data collection with ability to drill down is imperative to close the feedback loop on product quality. Operational warranty systems should be able to get real time data from different sources (dealers, OEM repair centers etc), transform the data into information and provide a platform for analytics driving efficiencies and product quality. Additionally this information should be used in feedback loops for root cause analysis, APQP (Advanced Product Quality Planning), DFM (Design for Manufacturing) as well as in PLM (Product Life Cycle Management) systems. A cohesive backbone of near real-time information driving analytics and decision making will help product companies transform to be best in class and create shareholder value. Disclaimer Copyright 2014, Tech Mahindra. All rights reserved. Tech Mahindra, herein referred to as TechM provide a wide array of presentations and reports, with the contributions of various professionals. These presentations and reports are for informational purposes and private circulation only and do not constitute an offer to buy or sell any securities mentioned therein. They do not purport to be a complete description of the markets conditions or developments referred to in the material. While utmost care has been taken in preparing the above, we claim no responsibility for their accuracy. We shall not be liable for any direct or indirect losses arising from the use thereof and the viewers are requested to use the information contained herein at their own risk. These presentations and reports should not be reproduced, re-circulated, published in any media, website or otherwise, in any form or manner, in part or as a whole, without the express consent in writing of TechM or its subsidiaries. Any unauthorized use, disclosure or public dissemination of information contained herein is prohibited. Unless specifically noted, TechM is not responsible for the content of these presentations and/or the opinions of the presenters. Individual situations and local practices and standards may vary, so viewers and others utilizing information contained within a presentation are free to adopt differing standards and approaches as they see fit. You may not repackage or sell the presentation. Products and names mentioned in materials or presentations are the property of their respective owners and the mention of them does not constitute an endorsement by TechM. Information contained in a presentation hosted or promoted by TechM is provided as is without warranty of any kind, either expressed or implied, including any warranty of merchantability or fitness for a particular purpose. TechM assumes no liability or responsibility for the contents of a presentation or the opinions expressed by the presenters. All expressions of opinion are subject to change without notice.

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