Achieving High Performance through Collaborative Warranty Management

Accenture believes that the automotive industry is poised to further efforts in value chain collaboration around warranty management.

How companies are beginning to address the problem is. In the past, warranty issues were viewed “between the four walls” of a given original equipment manufacturer (OEM), supplier or dealer. When problems arose, the workings of the extended value chain often were overlooked. Problem solving was difficult—if not impossible—because the exchange of information was stunted between OEM and dealer, dealer to supplier.

According to our continuing research, Accenture has identified the ability to create partnerships—and act in a collaborative manner—as one attribute of high-performance businesses. We believe that the automotive industry is poised to further efforts in value chain collaboration around warranty management. We are working with companies to broaden their view of warranty management issues and create common communications platforms between key players to help them achieve high performance.

Many companies have taken a punitive approach to warranty management. Car makers charge suppliers for non-quality compliance in an effort to reduce overall costs. This tactic often backfires because the actual problem—component defect or service error—can be nearly impossible to identify. Without a solid diagnostic process between manufacturer, dealer and supplier, product defects go undetected and repairs are erroneously reported. The result is a breakdown in collaboration and a loss of revenue for all players involved. By establishing a broad view of the warranty management life cycle—and creating communication platforms that ensure collaboration—manufacturers, dealerships and suppliers realize gains—and so do their customers. One key to communicating across the value chain is to create a common exchange for information, one that offers a single platform and codification of information. Through this seamless information exchange, all stakeholders can collaborate on warranty issues and thus improve business performance.

Another critical reason to strengthen communications across the warranty value chain: warranty extensions. As car makers continue to extend warranty periods to gain competitive advantage, they also will increase the potential for revenue loss if the current lack of communication between dealers and brand suppliers persists.

The proliferation of telematics can be leveraged in this trans-value chain communication. The realtime data exchange allowed by the technology can help car makers determine when repairs occur and the extent of work against a warranty. This allows original equipment makers and dealers to benchmark delivery of service—in terms of wait times—and reduce out of policy behaviors and fraud. The depth and quantity of information available through telematics can help companies minimize the risks surrounding the management of extended warranties, and significantly enhance their business performance.

From Administration to Value Focus
Another way to improve communications and gain greater control of the warranty management function is to strategically source non-value-add areas, such as claims handling. Companies focused in the administration of handling claims and the back-office aspects of warranty management drain precious resources that otherwise could be allocated to addressing quality issues. In the consumer electronics industry, Accenture has worked with a wide range of clients that have sourced their claims management and administrative functions. We see the automotive industry following suit. The strategic sourcing of back-office administration not only will help companies focus on the value-added quality initiatives that will improve business performance, but it also can significantly lower costs.

High-performance Warranty Management
As revenues continue to plummet, companies are looking for innovative ways to approach warranty management. Accenture’s experience in the industry in helping clients move to a higher level of performance is pointing to two trends. First, companies are working to create seamless communications across the value chain to allow for more collaborative handling of the area. And, following the example of consumer electronics, some are considering the strategic sourcing of administrative back-office areas to ensure a tighter focus on creating competitive barriers through warranty management. The end result: greater revenue generation in warranty and improved business performance.