Warranty Management – Meaning and its Components

Warranty Management had been traditionally viewed by companies as a cost of doing business. The costs of warranty management were found to be costing between 4 to 5 percent of the total sales revenue of the company per annum and were considered to be the cost of providing customer satisfaction and as an opportunity to building customer relationship.

However over the last few years, many organizations have realized the underlying value that can be realized in this area. Today Warranty Management is considered to be a separate revenue stream. The process of Warranty Management has evolved over a period. The benchmarking of best practices have led to reduction in cost of service delivery of parts with increase in customer satisfaction and an independent revenue stream of warranty services.

What is Warranty ?

Warranty is a statement of assurance or undertaking issued by the manufacturer of a product concerning the performance of the product and parts supplied by him by way of sale transaction to the customer, for a certain period as stated in the Warranty Card accompanying the product.

In other words, it is a performance guarantee for the product given by the manufacturer. In case of any poor performance due to the nonperformance of any part or defect in any part of the product, will be made good by the supplier/manufacturer with either replacement of the part or product or repair of the product.

Important Components of Warranty Management System

Warranty Management is today a separate function of Service Parts Management Stream in the organization. Service Parts Managers are P & L heads of their department and the entire business unit functions as a profit center with its revenue and cost budget.

Service Parts Management Team

Service Parts Management Teams and structure are the Service Support Delivery owners and function as primary contact points with the customer. At the first level Service, support teams comprise of Customer Desk, which is the first point contact for the customers to register the service request. Technicians and Engineers as front end site supports and second point contacts to the customers. Parts Support Managers oversee the functioning of the operations and take responsibility to close calls and for delivery performance.

Warranty Management and Claims Processing System

The entire business process and workflow management are driven by the Internet and e-commerce enabled system application that generally consists of the following modules:

• Service Warranty Database and Tracker (Database information uploaded from Sales Module)
• Service Request Registration, authorization, service job ticket issue, job ticket closure & Report functions.
• Parts procurement request, parts issue authorization
• Parts Inventory Management, Purchase Order Management, Repair Management, Vendor Management etc.

Logistics Service Management and Parts Supply Chain Management processes are driven outside the above system, managed by 3PL service providers and Logistics teams.

SME Experts

Service Parts Teams are supported by a team of Subject Matter Experts. Escalation processes determine the nature of technical support required to be assigned and timelines for service issue closures.

Parts Procurement and Logistics

Parts Procurement and Logistics may be handled by a single department or by separate teams depending upon the volume of business and the management structure.

These functions manage parts procurement functions, inbound logistics, parts warehousing and distribution on the outbound cycle.

Reverse Logistics functions managed by the team involve - Parts collection, parts segregation, inventory holding of defective parts, parts repair, warranty replacement with OE manufacturer, Re-Export, and Waste disposal or Scrapping functions.