Future of Warranty Management – Challenges and Solutions

Abstract

Warranty management has always been a challenging task for procurement managers in many asset intensive organizations. Although it is always been relegated as a non-productive, nonessential, manually intensive administrative task, nobody ever denies its potential to save cost and lower asset lifecycle costs. It also paves ways to improve asset reliability and production and better supplier decisions. Many missed opportunities can be bagged through a streamlined, integrated and automated warranty management system.

This whitepaper summarizes the industry outlook for warranty management, challenges to effective warranty tracking and management, the requirements and benefits of a closed loop automated warranty management system.
 

Introduction:

Most asset intensive organizations are yet to encase the opportunity to optimize warranty processes and reap both financial and operational benefits. It is not just a cost saving avenue but a key to other important benefits such as increased asset reliability, better production and improved supplier relationship management. The warranty management value chain typically intersects multiple functions within the manufacturing organization. It is associated with product engineering, quality control, sales, supply chain management, contract management, finance, etc., and few other functions as well. The warranty process flow starts with the customer requesting a return, repair or replacement of a product, a goods receipt by the service center or manufacturer, and repair at the service center or manufacturer’s site. This also involves activities such as warranty identification, claims submission, updating the materials register, dispatching a product, claims adjudication, claims credits, supplier warranty recovery, and chargeback. Today, organizations are moving from old conventional warranty management to strategically molded warranty management processes and systems.
 

Industry Outlook for Warranty Management:

The strong growth in industrial manufacturing capacity in the past decade has led to a sharp rise in assets to be managed beyond their original manufacturers’ warranty period. Most Original Equipment Manufacturers (OEMs) provide around 12–18 months of warranty on average for various utility equipment. They also offer additional 6–8 months of post-warranty service contracts; however, it mostly depends on factors such as the industry, type of asset/equipment and most importantly, supply market maturity in the region. For example, in developed regions, where the industry is extremely price competitive, a growing number of independent service providers (ISPs) are competing for market share. Again, situations sometimes force the buyer to opt for in-house operations and maintenance (O&M) services rather than outsourcing, to reduce the cost burden.