For many manufacturers, warranties serve as a double-edged sword. On one hand, it's leverage that assures customers the product is reliable and won't break. On the other hand, if they exercise their right to free repairs or replacements, it's costly to the producer because it comes out of its own pockets. Quality management becomes a greater concern as result, in part because there is a major need to keep costs to a minimum as well as maintain strong relationships with customers. A good warranty repair strategy, one based on the two-tier repair-replace paradigm, can make a significant difference in maintaining productive and profitable operations.

Understanding opportunities in improving warranties
Because the warranty is now an essential part of the sale of any given product, manufacturers must think less about their inclusion and more on how to reconcile processes related to their use in relation to actual unit production. Repairs take time, while replacements require disposal of the broken originals as well as writing off a new copy for the sake of satisfying the customer.

Manufacturing agency Wipro pointed out how many best-in-class enterprises address the pain points of a warranty policy. First, they develop streamlined processes so policies for each product remain consistent and strictly enforced. Second, they have an effective systems in place for supplier recovery, meaning that component or material suppliers will be expected to pick up some of the cost of a replacement or a repair. Finally, they have counter-measures in place to prevent customers from committing warranty fraud. By doing such things, these companies have ways to greatly minimize overhead costs that are often associated with making repairs as well as any accounting write-offs that go with sending out replacements. Moreover, there is an incentive for both the manufacturer and its suppliers to improve product quality.

In some industries, such as auto repair and computer equipment, the customers see their purchase as a long term investment. Manufacturers may want to take service contracts as a separate form of warranty into consideration. It's a form of monetization, for it covers only repairs, but extends the warranty significantly as a consequence. A company can add features to the contract that extend beyond basic repair. For example, in computers, the contract can include a full backup of the hard drive, malware detection, optimization and cleaning out the insides as necessary.

Being comprehensive in form
With all these options being considered, it's important to take into account the cost of warranties themselves. IndustryWeek noted the rise in warranty claims, and proposed the reasons being related to inefficiencies in how companies handled them. It's usually done in an ad-hoc manner and manually, so that it can easily interfere with some levels of automated operations such as enterprise resource planning software amongst others. Moreover, the processes tend to be done on paper, which leads to a lack of clarity on what's actually happening with a customer's request.

As a consequence, in correlation to what was suggested above, the most effective way of addressing warranties is to create a holistic strategy that covers every type of cost in a claim:

  • Process costs, such as logistics both ways and completing administrative tasks.
  • People costs, in particular labor costs as well as placating aggrieved customers.
  • Product costs, namely the price tag on a full replacement or parts.

All of these have interdependent roles for one another. One way of streamlining the process is to utilize ERP solutions such as modules to handle warranty claims automatically. In doing this, it's much easier to take into account all of the different factors that affect a warranty claim, reducing costs overall.

Repair shops looking to improve their efficiency should learn more about the features and benefits of Microsoft Dynamics NAV today.