Managing warranties proves to be problematic

Supply chain executives are among those now charged with managing product warranties. This is not necessarily a good thing, say industry analysts.

A new study published by IDC Manufacturing Insights, “Methods and Practices: Warranty Capabilities Maturity Model” reveals that while most product companies recognize the criticality of effective warranty management practices, very few companies are addressing the problem effectively.

“We see that executives in supply chain, finance, IT, and even legal, are being given this responsibility,” said Sheila Brennan, Program Manager, Product Lifecycle Strategies, IDC Manufacturing Insights. “The problem is not being addressed with any one metric model.”

In fact, she added, most product companies do not consistently benchmark their warranty organizations, with less than 20 percent of companies even benchmarking internally.?

“It would be ideal if companies were provided with the equivalent of a SCOR for this function,” added Brennan.

Supply Chain Council (SCC) is a global nonprofit organization whose framework, improvement methodology, training, certification and benchmarking tools help member organizations make dramatic, rapid, and sustainable improvements in supply chain performance.

SCOR – the Supply Chain Operations Reference is the world standard for supply chain management, created by the Supply Chain Council. According to Brennan, warranty managers need a similar framework for defining and linking performance metrics, processes, best practices, and people into a unified structure.

“Until now, the industry has not had a set of best practices to rely upon,” she said in an interview.

Key findings resulting from IDC Manufacturing Insights’ Worldwide Warranty Survey conducted in conjunction with WarrantyWeek.com, include:

• Most product companies do not consistently benchmark their warranty organizations, with less than 20 percent of companies even benchmarking internally.?• Low product quality and poor warranty coverage and repair can significantly tarnish a brand. However, only a little over half of leading companies and less than 20 percent of laggards use warranty management proactively to improve their brand image.?

• Nearly all (92 percent) of leading companies are pursuing opportunities to improve accrual management, but only 61 percent of laggard companies do.?

• Approximately 60 percent of leading companies employ proactive means to improve warranty performance through the use of fraud detection methods and early quality warning systems. Less than 20 percent of laggard companies do.?

“Based on our research, the manufacturing industry’s ability to drive warranty improvement is minimal,” said Joe Barkai, practice director, at IDC Manufacturing Insights.

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