5 Things You Probably Don’t Know About The Warranty Process That’s Costing You Billions

Despite quality improvements and more advanced technology, costly recalls, warranty claims, and safety issues continue to strain automakers. Over the past two decades, recalls have risen steadily. In the United States alone, National Highway Traffic Safety Administration (NHTSA) reported 141 recalls that covered 34 million vehicles in the first three quarters in 2015. This is about five times as many as passenger cars were sold! The total costs of these claims heavily burden corporate earnings.

It’s true that today’s vehicles are better engineered, safer, and higher in quality than any other time in the industry’s history. However, there is also increased government and consumer scrutiny. With such increased pressure, automakers are forced to respond to safety concerns quickly and efficiently. Not only are these repair costs totaling in the tens of billions of dollars each year, but they are also keeping dealers, suppliers, engineers, lawyers, regulators, data crunchers, and PR analysts very busy.

Even though claims impact as much as 3.3% of automaker revenue between 2003 and 2015, it seems that most companies are focusing on higher quality to drive down costs. But here’s the reality: Quality and technology alone will not work. What’s needed is a comprehensive approach that addresses several shortcomings in the areas of warranty management, process, and technology.

Warranty management: From chaos to competitive advantage

An integrated approach to warranty management can help build interdepartmental synergies and transform the function from a liability to a competitive advantage that builds consumer trust and loyalty. In fact, Ernst & Young recently uncovered that 70% of automakers believe that increasing emphasis on the customer experience is driving business growth – and the warranty and repair function is just one of many touch points.

How can you step up your company’s warranty claims processes and management? Here are four things you should consider changing.

1. Build an integrated warranty system that provides wide access to related master data, including the vehicles or components you sell, warranty terms and conditions, spare parts, sales transactions, and purchasing prices. You can use simple – yet effective – methods for checking incoming warranty claims. Not only does this approach prevent fraud, but it also helps you identify any unjustified claims.

2. Tear down the barrier between customer and vendor warranty processing. By integrating these processes, each customer warranty claim can potentially be charged to a supplier – ultimately, reducing your total warranty cost.

3. Implement automatic warranty checks for consistent decision making and accelerated warranty processing. This brings down process cost and increases customer satisfaction.

4. Define a global warranty process running on harmonized data. Connecting warranty data to business processes and systems ensures that analysis is based on consistent, real-time data.

5. Analyze warranty data in conjunction with production data. This enables more-informed decision making through valuable insights into product quality and opportunities for improvement.

Is your automotive business ready for a digital transformation? Find out how SAP Automotive Consulting Solutions can help by visiting www.sap.de/ACS/warranty.

Contacts: Christian Wittmann; Clemens Paulus (SAP Consulting)