Warranty Performance Analysis
DEFINITION
Identification and prioritization of warranty performance tracking and cost reduction opportunities.
SITUATION
Products with warranties incur expenses across many departments and processes within a company. Tracking, monitoring and controlling these expenses requires a common understanding of these processes and a common set of warranty metrics. Many organizations track the direct expenses or material costs, but miss the hidden costs incurred in managing warranty. These may include labor, failure analysis, vendor penalties, spare part inventory and logistic costs.
OBJECTIVES
To identify and prioritize the appropriate warranty metrics, goals, strategies and action plans to reduce warranty expenses. Optionally, an in-depth warranty cost analysis for a released product can be performed to better estimate the action plan’s potential warranty cost saving.
VALUE TO YOUR ORGANIZATION
Make the true sources of warranty expenses visible, permitting prioritization of resources to focus on reducing warranty expenses. Actively manage warranty expenses.
RELIABILITY INTEGRATION
An example of Reliability Integration during Warranty Performance Analysis is as follows:
Using Reliability Information Gathered During Product Development for Warranty Analysis
Using reliability information gathered during product development can prepare call centers and return/repair centers for anticipated problems.
Design for Warranty service will use the goals, strategies and data (from optional single product in-depth analysis) to jump-start its analysis work with the development team in product design.
METHODOLOGY
Conduct a system analysis of the warranty program including material and information flow through the complete organization including the Support organization, when appropriate. With recent field failure information, develop a model to simulate changes to the warranty handling process and determine expected financial impact. Develop a set of action plans to install appropriate warranty tracking metrics to monitor the process and focus on expense reduction goals.
If performing a single product warranty cost analysis, the warranty cost model used in Design for Warranty service will be used for the analysis.
CASE STUDIES/OPTIONS
The following case studies and options provide example approaches. We shall tailor our approach to meet your specific situation
A test and measurement company producing handheld to bench-top precision test equipment tracked an overall warranty return rate. They knew that the larger more complex products had more costs than the robust handheld units, yet the metric and the method of compiling the data did not reveal the differences. By refocusing the data collection to product lines categories and measuring failure rates and warranty cost per unit, the variability of the high-end products became the clear opportunity for improvement. Furthermore, the management team was able to establish warranty targets for each product based on existing performance and business needs.
A computer peripheral company only used Annualized Failure Rate (AFR) metrics for their R/D team’s warranty business goals. A Warranty Performance Analysis showed that while realistic AFR goals were being ‘met’, the product warranty costs were not meeting business goals due to a very high ‘no trouble found (NTF)’ percentage for returned parts involved in a few very costly warranty events types. Management expanded R/D’s metrics to include product line warranty cost goals. Monthly NTF metrics for key components were added to the Supply Chain and Support’s business fundamentals reporting table. A cross functional task group with R/D and Support was formed to for on the Diagnostics-NTF opportunity.
