Managing Warranties is often a costly exercise for many Businesses. To understand the reasons, a little background will be useful

Background

1. Companies use a network of dealers to get their products to the market
2. They partner with a whole lot of suppliers. Contracts may vary with each supplier
3. Different dealers might have different contract agreements with the Manufacturers
4. Contracts with suppliers or dealers can change over time, or new dealers or suppliers will come into the business ecosystem
5. The number of Products will normally be varied.
6. The Warranty claims can flow from Customer-Dealer-Manufacturer-Supplier
7. Inventory cost is usually high when Warranty claims are managed poorly
8. Multiple Departments are usually involved in the whole process including IT, Inventory, Purchase, Recovery. It is not uncommon for all these departments to work on different IT systems

The high cost can arise from any of the following reasons

1. Processing, validating, reviewing Warranty claims is a manual and error prone activity.In one company that I know of, it used to take 6-8 weeks
2. The Warranty policies, contracts are typically not strictly enforced. This in-turn can lead to fraudulent claims, incorrect billing, and excessive payments.
3. When supplier contracts change, the changes might not flow back into the system immediately. This might lead to incorrect billing
4. Multiple departments might not have the same visibility into the system, or might be using multiple IT systems. This can cause delays in payments for approved claims
5. Mistakes in separating the company’s warranty responsibilities from those of their suppliers or distributors, results in them covering costs that should be borne by others

The cost implications are serious. Some of them could be

1. People’s time spent on manual processing adds to higher Salary costs
2. This also means that the same people cannot be redeployed to other important activities
3. Unrealized claim value can be in the order of 20%, which could add upto 10’s of 1000’s of claims a year
4. Poor claims management will mean that the Inventory has to remain stocked. This can potentially be huge
5. Poor claims Management might impact relationships with Dealers & Suppliers and might even affect Customer Satisfaction
6. Communication Gaps lead to poor sharing of information about defects

So what can you do?

1. Get the contracts out of your Code. Evangelize using a Business Rules Management System.Business Rules offer a natural way to capture and enforce contracts
2. Supplier Billing Rules, Parts Disposition Rules to name a few, are typically captured as XLS. Use Decision Tables and import these Rules directly from your XLS. No Manual conversion, no errors
3. Rules that determine which Business Unit in the Company should handle a claim are best captured Visually in the form of a Flow Chart. QuickRules.NET, for example supports capturing a Rule execution sequence in the form of a Visio Flow Chart
4. Other Operations like “Determining who is responsible for a Claim”, Billing and Pricing Rules etc also lend to a similar argument.
5. Centralizing Policy enforcement using a BRMS can lead to huge benefits in
   1. Immediate Visibility into the System
   2. Eliminate Communication Gaps between the different Departments, and between suppliers and Dealers
   3. Automate upto 100% of your Warranty claims Processing, and therefore drastically reduce Inventory buildup
6. You can read this Case Study on our Website.