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Author's profile photo Muralidharan Seetharam Sharma

Various warranty processes with service cost impact in SAP Warranty Management

In this blog post, I would like to share my views on various Warranty processes and how the service costs are handled.

This will help the Service & Warranty consultants to understand the service cost better and decide on when ‘to bill the customer’ or ‘claim the cost to the vendor’ or ‘adjust the cost in their internal accounts’

What is Warranty?

A Warranty is a type of guarantee, issued to the purchaser of an article by its manufacturer or similar party, promising to repair or replace it if necessary, within a specified period or condition.

Details on Warranty

Warranty for example is offered against the

  • Equipment with Serial Number
  • Vehicle Master with VIN (Vehicle Identification number)

Any service performed on an Equipment or Vehicle will incur some amount of cost and it can be broadly divided in to

  • Material (E.g.: – Spare parts)
  • Internal Labor (E.g.: – Five hours of repair work)
  • Sublet or External service (E.g.: – Towing charges, Travel charges etc.)

These costs are either borne by

  • OEM (Original Equipment Manufacturer) or
  • the distributor of the Equipment/Vehicle or
  • the end customer

Warranty offered by the OEM or the distributor can be either

  • Time related (E.g.: – 5 years Warranty),
  • Performance related (E.g.: -1,00,000 KMs)
  • both performance AND time related (E.g.: -5 Years & 1,00,000 KMs)

Type of Warranty processes

Pre-sales Warranty: –

This is not exactly classified as Warranty. Any service done before the actual sale of Equipment/Vehicle to the end customer is reimbursed from OEM. This Warranty expires when the Equipment/Vehicle is sold to the customer. Typical this warranty would be like 100 Kms or 100 running hours without any time constraint.

Standard Warranty: –

Standard Warranty starts when the vehicle is sold to the customer. This is offered by OEM and any cost incurred on the Equipment/Vehicle service during this warranty period is claimed to the OEM.

Extended Warranty: –

Extended Warranty starts when any one parameter of the Standard Warranty ends. This is offered by Distributor and cost of the service will be borne by them.

Extension Repair/Service bulletin: –

List of corrections issued by the OEM which is for a set of serial numbers of the Equipment or VIN of the Vehicle. It is not mandatory for the distributor or the dealer to invite the customer for repair.

If there is a regular service or any break down, then this service is performed on the Equipment/Vehicle. The customer may not even know such ER/SB exist until the customer takes the Equipment/Vehicle to the dealer or distributor

Generally, the cost is borne by the OEM. Sometimes the distributor can issue SB where the cost is taken by the distributor

Recalls: –

Corrections or recalls are issued by OEM which has legal implications. The government agencies closely track the Recalls done for each serial number/VIN.

The cost is borne by the OEM. The distributors should advertise the recalls, so that the customers are aware of the Serial numbers/VINs affected.

Parts Warranty: –

Warranty on spare parts sold to the customer. Typically, the warranty start date would be the Sales Invoice date and will be valid for a year. This cost is borne by the OEM, so the distributor/dealer claims the cost to OEM whenever the spare parts are replaced.

Goodwill: –

This type of coverage is applicable only after the end of Standard or Extended warranty. Based on the customer’s business dealings with the OEM or distributor, either of OEM & Distributor or both can take partial or full expense of the service performed.

Pre-approval may be required for the Goodwill claims, so ‘Authorization’ is created in the system and sent to OEM for approval. Once the Authorization is approved by the OEM the Goodwill claims can be raised to OEM.

Authorization: –

Whenever a goodwill or policy job is done, the distributor is expected to get prior approval from the OEM. Here the OEM can partially or fully approve the estimated amount.

For the OEM to approve the Goodwill claim this Authorization number should be quoted in the Goodwill claim

  

High level SAP Warranty Management solution

Warranty process SAP process SAP Master data
Pre-sales Warranty Pre-credit/Post credit claim type Warranty master in BGM1 transaction
Standard Warranty Pre-credit/Post credit claim type Warranty master in BGM1 transaction
Extended Warranty Pre-credit/Post credit claim type Warranty master in BGM1 transaction
Extension Repair/ Service Bulletin Pre-credit/Post credit claim type Master data is the Recall master ‘WTYRCL
Recalls Pre-credit/Post credit claim type Master data is the Recall master ‘WTYRCL
Parts Warranty Pre-credit/Post credit claim type Warranty master in BGM1 transaction
Goodwill Pre-credit/Post credit claim type Not Applicable
Authorization WTYAUT transaction for Authorization Not Applicable

 

I hope that this blog provided the nuances of the service costs in the Service & Warranty processes. Please feel free to provide me with your comments/suggestion to improve this blog post.

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      7 Comments
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      Author's profile photo Ramanujam Duraisamy
      Ramanujam Duraisamy

      Very informative for an overall understanding of the warranty process / solutions available in SAP. Thoughtfully business connect has been made by referring Automobile industry and the examples given makes it easier to connect with the topic.

      Pre credit / Post credit claim process in SAP will be interesting to learn. Am sure you will help us in the community by sharing your experience in the follow up blog.

      Author's profile photo Shubham Srivastava
      Shubham Srivastava

      Good One

      Author's profile photo Harikrishna Kudaravalli
      Harikrishna Kudaravalli

      Thanks Murali for collating the details around warranty processes and cost impact in SWM...Very useful!!

      Author's profile photo Himavanth Sunakante
      Himavanth Sunakante

      Nice Murali, Thanks for sharing your insights....definitely this will help others....!!!!

      Author's profile photo Girish Kini
      Girish Kini

      Hi Murali,

       

      Thanks for sharing this nice article on warranty management. If possible, can you please also elaborate on how a company (being a customer) can manage/track warranties on the equipment and parts they buy from vendors?

      Author's profile photo Ramu Kengua
      Ramu Kengua

      Thanks Murali for sharing the information. Is there any best practice document to know the extended warranty tracking Revenue and cost booking?

      Author's profile photo Nagarajan Venkata
      Nagarajan Venkata

      Very informative and Nice Post

      Is it possible for you to please continue in another blog with an example or scenario  with screens?

      I have one more question: Is it possible to enforce the Warranty on Linear Assets ( Example: Roads, Rail networks)

       

      Thanks

      Nag