Takeaways from the IBS Automotive Warranty Management Forum

In this post we will focus on providing a high level understanding of the intricacies facing automotive manufacturers and suppliers in the area of warranty management. We will also analyze the solution portfolio of IBS and its vision of helping companies manage quality across disparate areas of business through Enterprise Quality Management Software. Finally, this post will highlight the best practices shared by several automotive manufacturers at the event and provide key takeaways for executives responsible for warranty management in the automotive industry.

For more details and information there will be a full research document posted in the LNS Research Library when the full website goes live in several weeks.

The Automotive Industry is Transforming and so is Warranty Management

Nobody questions that the automotive market has transformed over the past five years. GM and Chrysler both went bankrupt. By some counts, an additional 40 or more Tier 1 Suppliers have also gone bankrupt. These events have transformed many different areas of the industry, including warranty management. Throughout the economic downturn OEMs saw a plummeting of their warranty reserves as sales dried up. The reserve levels have come back now, but changes in the processes and supply chain relationships that had already started will continue.

It was clear from the discussions had at the event that OEMs are now looking to recapture more warranty costs from suppliers. Many have put programs in place to accomplish this, all of which requires more information and traceability data from suppliers for quality. Now that OEMs are getting more serious about recapturing these costs, suppliers have to have much better systems to track their own defects and failure modes through the supply chain to have evidence based discussions with customers as to what went wrong and when. Without good data, these discussions, negotiations, and investigations are certain to break down with negative results

Effective Warranty Management is more than Accrual Rates and Reserves

There was a lot of interesting warranty data shared at the forum, including data on warranty reserves and accrual rates from large OEMs, large suppliers, and even other industries. What became apparent from this data is that it becomes very easy to just look at warranty management from the perspective of easily measurable financial metrics. Questions that can be relatively easily answered by these metrics include:

• How much are companies holding in warranty reserves?
• What percentage of sales goes to warranty costs?
• How do warranty costs flow through the supply chain?

These metrics are important for executives who see, in some cases, billions of dollars sitting in warranty reserves. It is obviously a good strategy to reduce these reserves. However, what is less easy to measure and improve is how quality and product reliability impacts long term warranty costs.

Market leading companies are addressing this by viewing warranty management as more than just efficient management of warranty processes and setting good benchmarks on warranty metrics. Rather they believe good warranty management involves continually improving the reliability of products to reduce real costs through a closed loop approach to quality management. Another important area of focus is risk management. To successfully implement a warranty and risk management program a company has to foster business processes that create collaboration across departments as diverse as procurement, engineering, manufacturing, supply chain, sales, service, finance, and risk.

The IBS Vision for Warranty Management

It was clear from the event that IBS has a strong portfolio and vision of how to effectively manage warranty processes in the automotive industry. For IBS, it goes well beyond just their warranty management module, which is well adopted in the industry. IBS takes an approach to warranty management that is much more than just managing policies and workflows within warranty management departments. IBS believes effective warranty management should be a complete closed-loop quality management process that touches every stage of the product life cycle.

What was most impressive from the event is that IBS has the ability to demonstrate the effectiveness of this approach through a strong client list of OEM and Tier 1 automotive supplier customers at every stage of the quality life cycle, which includes:

• Design for quality
• FMEA and APQP
• Quality Control and Assurance on the Shop Floor
• NC / CAPA
• Risk Management
• Complaint Management
• Warranty Management

Concluding Thoughts

Market leading companies are realizing that to effectively manage warranty programs it takes more than just efficient processes and clever financial strategies. These leading companies will continue to invest in quality systems that help manage and connect every part of the product lifecycle from a quality perspective.

For more information on this topic and many others related to quality, manufacturing, sustainability, and more, please check back frequently for the launch of the LNS Research Library.