How To Develop A Closed Loop Warranty Management Ecosystem .

How to Develop a Closed LoopWarranty Management Ecosystemto Boost Revenues?WNSExtending Your Enterprise

WNSExtending Your EnterpriseMore than a decade ago, an auto majorquadrupled its sales because it offered affordableprices and a 10-year, 100,000 miles warranty.Warranty still continues to rule the roost inbuilding brand reliability. However, with customerexpectations at an all-time high, and challengesin the business environment multiplying, theconventional warranty management approachfails to address all complexities existent in thewarranty ecosystem.In the lifecycle of managing warranties,businesses have to contend with the pressuresof increasing service profitability and reducingcustomer costs. At the same time, they need todifferentiate genuine from fraudulent warrantyclaims, reduce delays in claim settlements,and ensure customer satisfaction.The conventional approach to warrantymanagement is flawed, as it fails to warranty as a critical component of an overallcorporate strategy and a competitivedifferentiator. The traditional approach is rathermyopic in nature and addresses either the costelement or the quality element, one at a time.Moving beyond the conventional approach to the‘closed loop’ warranty management system helpsnot just in boosting revenues but also helpsgain a competitive edge and improve regulatorycompliance, among other things. This whitepapertells you how.Warranty Management –Integral to Brand Reliability,but Seeped in ChallengesThere are multiple vulnerable points in thewarranty cycle, where a minor disruption cansnowball into a major bottleneck in the ecoveryGroup1Group2Claimsettlement delays185 days for detectionLack of data monitoring skillsInvalid / Fraudulent claimsCustomer dissatisfaction50%30%Inadequate repair knowledgeIneffectivecoordinationA: The typical warranty management cycle interspersedwith a maze of challenges.B: Challenges rated as highby business execs inwarranty-led businesses.Adapted from a recentAberdeen Group survey.Increased warrantymanagement costsshrink their revenuesIncreased warranty costsStringent corporatedeadlines to improveservice profitabilitySupplier upper handOverpaymentsLengthier processing timesInaccurate Root Cause AnalysisInaccurate service documentationInformation capture failureFig. 1: Challenges in the warranty life cycle.A: The typical maze of challenges that impact multiple levels of the warranty life cycle.B: In a recently concluded survey by the Aberdeen Group, close to 50 percent of respondents reported ‘workingunder stringent corporate deadlines to improve service profitability’ as their primary challenge. 30 percent ofsurvey-takers felt that ‘increased warranty management costs shrink their revenues considerably’.

Typical disruptions in the warrantymanagement chain:nFailure to capture information at the suppliersub-assembly make it difficult to identify andship the correct replacement parts to theservice center. The lack of this informationmakes it difficult to draw up servicedocuments accurately and comprehensively.nLack of repair knowledge often prevents anorganization from resolving an issue to thesatisfaction of the customer who is thencompelled to raise a warranty claim.nLack of data monitoring and administrationskills increase the time needed to sift throughinvalid and fraudulent claims. This not justincreases warranty costs by increasingprocessing times but also delays theresolution of valid claims and can alsoresult in overpayment.nFailure to collect the requisite data to carryout an accurate Root Cause Analysis (RCA)prevents an organization from resolving awarranty issue satisfactorily.nLack of adequate data regarding the nature ofthe warranty issue prevents an organizationfrom gaining an upper hand when negotiatingwith suppliers to recover the warranty.nIneffective coordination among variousdepartments in the warranty chain, likeCustomer Service, Quality Assurance, andProcurement, prevents organizations fromresolving warranty issues speedily. On anaverage it takes about 185 days to detectsomething is wrong or to define what iswrong!and increase warranty costs, as shown in fig. 1.Consider this: While repeat failures could beattributed to a product quality problem they couldalso arise from a repair center issue. Spotting theexact problem is usually time-consuming andresource-intensive. It is estimated that on anaverage it takes about 185 days to detectsomething is wrong or to define what is wrong!The warranty management life cycle becomes allthe more complex because new products withcomplicated features are launched regularly andthe existing ones quickly become obsolete.Complexities also arise if the limited warrantyperiod lapses or when businesses are required toprovide extended warranty services and thereforeget into service contract agreements withtheir clients.The inherent complexities in the warrantylifecycle increases the chances of disruptions,thereby escalating warranty expenses.Furthermore, when organizations fail tosatisfactorily resolve warranty issues, customerloyalty diminishes and brand goodwill suffers.These, in turn, lead to a decrease in sales anda dip in revenues.According to findings reported in the WarrantyWeek, organizations end up paying tens ofbillions of dollars every year to cover warrantymanagement costs. For some organizations theirwarranty costs represent 2 percent or more oftheir annual revenues!Warranty-led businesses, dealing with thedual pressures of streamlining the warrantymanagement process and of optimizinginvestment under this head often adoptconventional warranty management solutions,which in most cases, are incapable ofmeeting the strategic objectives of thewarranty organization.

WNSExtending Your Enterpriseor both of the following two courses of action,shown in fig. 2 to reduce warranty costs.Conventional WarrantyManagement – Integral toBrand Reliability, but Seepedin ChallengesThough aimed at reducing warranty costs, the twoconventional methods are flawed.The first method is reactionary and regardswarranty management solely as a cost element.Conventional warranty management solutions —used widely by many organizations — follow oneThe second method focuses only on improvingproduct quality.Focuses onMethod IImparting more efficiency intothe administration of warrantyclaims, by detectingfraudulent claims andservicing valid claims quickly.QualityonlyCostonlyMethod IIImproving operationalprocedures, by assessingrepair data to detect andunderstand causes ofwarranty claims.Focuses onFig. 2: Conventional warranty management solutions are flawed as they have a unidimensional approach.Both approaches are inadequate because they failto consider warranty as a critical component of anoverall corporate strategy and a competitivedifferentiator. That is, both these approachesfail to recognize the importance of warrantymanagement in all stages of the product lifecycle. This oversight in turn, fails to bringtogether dispersed business processes, keepsdepartments in functional silos, and hampersaccurate decision-making by not providing keydecision-makers with a holistic view of what ishappening throughout the product life cycle.It is imperative that businesses now look beyondthese ineffective warranty managementapproaches and embrace one that overcomesthe shortcomings of the conventional approach.ManufacturingProduct EngineeringFinanceProcurementQualitySalesCustomer ServiceFig. 3: A representative ‘closed loop’ warranty management system

Moving Beyond theConventional Route to the‘Closed Loop’ WarrantyManagement SystemDeficiencies in the warranty management cyclecan be effectively countered only if the warrantydata is better managed and more efficientlytransmitted across various business processesand departments. What’s also critical is that theissues be resolved at every stage of the productlife cycle for better and wider business impact.A centrally-located and administered or “closedloop” warranty management system is an optimalsolution that can solve all existing challenges andcomplexities in the warranty management cycle.A closed loop system can capture all relevant bitsof data, analyze it, and transfer the informationbetween departments to improve product qualityand provide better field service. When the variousprocesses in the warranty chain are integratedand streamlined, warranty costs come down,and there is greater end-customer satisfaction.and stakeholders, like suppliers, repair dealers,and internal users are recorded in databases.These humongous chunks of data are thenanalyzed using mathematical tools and models.This helps organizations generate early warningsystems, carry out warranty cost variation andclaims handling efficiency analyses, preparefailure control charts, and perform diagnosticprocedures to determine root causes of issuesand the reasons behind repeat failures.These advanced analytical models can help anorganization optimize dealer and suppliermanagement procedures, lay down stringentrisk-based business rules based on empiricaldata, and carry out rule-based adjudicatorassignment and charge allocation tasks.The mathematical tools and models help spotpatterns and trends in the data and this,in turn, facilitates improved understandingof how processes work and where they can bestreamlined. These insights help organizationsbenchmark warranty processes and enhancecollaborative efforts between functions toreduce wastage.The three key components of a closed loopwarranty management system are:nTechnologynProcess / Framework that includes the modelsand mathematical tools and techniques tocarry out the respective processes involvingthis componentnA closed loop warranty management systemperforms the following functions:nAutomates the processes in the warrantychain to minimize human interventionnIntegrates all the processes anddepartments in the chainnProvides at-a-glance visibility of theentire warranty chainnDetects ineffective processes andnon-value adding activities in the chainnEliminates ineffective andwasteful processesnProvides data on the keyperformance indicatorsnDetects fraudulent warranty claimsnDetects other issues, anomalies,or disruptions in the chainAnalyticsThe technology platform of such a warrantymanagement system is powerful enough tocontrol various disparate business processeslike workflow and recovery management,claims administration, electronic invoicing,and customer service. Technology enablementmakes the interaction of the various componentsof a closed loop warranty management systempossible and thereby optimizes processes likeservice and repair, administration of claims,warranty recovery, and resolution of issues.Data is generated from the processes and / or areprovided by functions, like Finance and Sales,