A Next-Generation Approach to Integrated Warranty ManagementFor today’s manufacturers, gaining actionable insights from customers’ warranty data requires a closed-loop system that pivots around a single version of the truth, across all business functions.

Executive SummaryWarranty management is among the most tangible customer-facing activities — offering manufacturers the opportunity to enhance the customer experience by automating the admin-istration of terms and contracts. Also, warranty information is an important source of “on-the-ground” failure data, which is critical for future product designs.

Nonetheless, the cost of warranty management continues to rise. High-tech and consumer electronics companies are among the hardest hit — subject to escalating warranty management costs due in part to rapidly falling prices, increasing product complexity and rising demands from quality-focused customers.

While claims continue to consume a sizable portion of revenue earned on each sale, other factors — identifying the root cause of a product defect, pinpointing faulty repairs and the lack of a mechanism for timely supplier recovery — only add to costs. Distributed applications and functional silos across the enterprise slow down claims processing and fraud detection. Furthermore, they do not provide the failure-related informa-tion needed from the warranty data — essential to the development of new and improved next-generation products.

This white paper details critical elements of a next-generation warranty management system, which can help OEMs reduce the total cost of ownership (TCO) in warranty claims processing, and utilize data that can be used by product-engineering teams to ensure the development of high-quality products.

The Warranty Management Value ChainThe warranty management value chain typically intersects multiple business functions within the manufacturing organization: product develop-ment (i.e., product engineering, quality control); product management; sales; service; supply chain management (parts, procurement); contract management; claims processing; finance, as well as electronic distribution. For example:

• The product development team is respon-sible for the overall design and quality of the product.

• The product management team owns the terms and conditions of the warranty; updates content related to the product; creates the warranty, and assigns asset components or individual parts to associated warranties.

• The sales team uses data pertaining to terms and conditions to remain competitive and boost revenues.

cognizant 20-20 insights | march 2015

Cognizant 20-20 Insights

Customer/Distributor

Service Desk

Field Service

Claims

Finance

Plant/Repair Center

Inventory

Register Claim Request

Dispatch Damaged/Defective Product

Receive Claims

Receive Replaced Product

Create Claim

Validate Entitlement and Service Contract

Reject Claim if Not Entitled

Create Work Order

Schedule Technician

Update Status

Validate Service Response

Send FieldTechnician

Perform Service Request

Perform Defect Analysis

Raise Parts Request

Fix Defect With Spare Parts

Record Expenses

Manually Verify Claim

Manage Process Claims

Manage Credit/Debit Customer Account

Generate Settlement Report

Invoice ClaimManage Accounting

and Reserving Update AR/AP Process Payment

Update RCA Database

Perform Repair Analysis

Update BOM with Replaced Parts

Dispatch Repaired Product to Customer

Receive Defective Product

Update Refurbished Inventory

Identify New Product

Update Defective Product Inventory

Perform Defect Analysis

• Service executes the promised warranty terms and creates a job or service order. The service/work order contains the details of the warranty or information on the extended warranty.

• Field service reps visit customer sites and oversee investigations or repairs, based on the nature of the defect. Reps can also request spare parts or replaceable product components.

• Repair center technicians perform defect and repair analyses of products that are returned by the customer for repair or replacement.

• The supply chain group plans delivery based on replace, repair or recall requests, and manages supplier-recovery processes.

• Contract management defines the warranty terms at the contract stage to support service chain continuity and overall profitability.

• Claims processing takes care of warranty claims submitted by customers and service partners.

• Finance manages the warranty reserves and performs audits.

• Electronic distributors are often responsible for supplying design details to the manufac-turer and ordering parts.

The warranty process flows through various after-sales services during its lifecycle. It involves a customer requesting a return, repair or replace-ment of a product, a goods receipt by the service center or manufacturer, and repair at the service center or manufacturer’s site. These steps are followed by activities that include warranty identification; claims submission; updating the materials register; dispatching a product to a customer; claims adjudication; claims credits; supplier warranty/recovery, and chargeback.

Figure 1 below represents the processes typically involved in warranty management.

The Challenges Manufacturers Face

Consumer electronics and high-tech manu-facturers in particular encounter enormous obstacles when attempting to increase the speed of warranty claims processing across business functions; utilize warranty data to analyze product performance; assess key warranty cost drivers; decode field-service issues, and confirm the serviceability and reliability of products.

The Warranty Management Continuum

Figure 1

These issues can be traced in part to:

• Ad-hoc processes, including ambiguous warranty information in service contracts, manual claims processing, as well as financial reconciliation and analytics procedures.

• Warranty data is often retained by the service organization, and not immediately shared across the product development value chain. Engineering teams have less time to incorporate real-time information on defects into product design.

• Human-dependent warranty processes that involve manual review and processing of claims.

• Lack of an automated process for verifying claims with the verification system to match claims against policies and detect irregu-larities — often forcing companies to pay on fraudulent and invalid claims.

• Risk of under- or over-budgeting for warranty payouts due to inaccurate forecasts.

Applying Closed-Loop Warranty ManagementWarranty data benefits numerous business functions. It helps organizations understand how their products perform vis-à-vis competitive offerings, identify factors that affect warranty cost and, most important, confirm the acceptabil-ity of products from a performance and service-ability point of view.

Best-in-class organizations use this data across the warranty value chain to:

• Enhance field service.

• Augment return management.

• Improve the repair process.

• Bring needed changes to product design.

• Improve recall management.

To address the challenges associated with war-ranty management and fully utilize the power of warranty data, companies need to focus on automating their processes and technologies (see Figure 2).

A Three-Step Approach to Automating Warranty Management

Figure 2

• Align warranty strategies with business and oper-ational strategies. Provide a longer warranty period if your strategic objective is to use the warranty T&C as a competitive tool. Conversely, offer a shorter warranty period if your strategy is to generate revenue through extended warranty sales.

• Build automated processes aided by configurable rules and process workflows to reduce manual intervention in different phases of the warranty management cycle (claim validation, claim approval, claim routing, reserve forecasting, etc.).

• Integrate warranty management with all interfacing business functions and systems, including:

> Customer Relationship Management.

> Claims Management.

> Field Service and Supplier Recovery.

> The ERP system for Repair and Return Management and Claims Management.

> PLM for Quality Improvement.

> Decision Support Systems/BI for Decision Automation and Fraud Detection.

> Finance Systems for Warranty Accounting.

• Incorporate warranty management into the organiza-tion’s enterprise analytics and decision support systems. Managing warranties in a reactive mode is no longer sufficient in today’s hi-tech manufacturing industry, which is under a lot of pressure from customers’ high expectations. Proactive warranty management requires

• Perform organizational change management for aligning people with process and technology changes.

• Conduct training for business process owners and supplier stakeholders on managing warranty functions effectively.

analytics-driven decision support in three major areas:

> Issue prediction, detection and warning.

> Warranty and accrual forecasting.

> Service parts demand management and service contract optimization.

Based on this data, companies can foresee emerging is-sues and decide on potential recall, predict future war-ranty costs, accurately forecast spare parts demand, and plan inventory and production accordingly.

• Build a portal for submitting claims for customers and vendors.

• Build a mobile app for customers to log warranty claims and track warranty status.

• Choose industry standard B2B communication protocols like EDI, RosettaNet, XML, etc., for integrating enterprise, supplier and other systems involved in the warranty management process.

Process

Technology

Change Management

cognizant 20-20 insights 4

Channel

Users

Warranty Management

System

Field Service Claims Entitlements Service

View Entitlements Settle Claims

View Claims

Process Claims

Schedule Jobs

Interfaces Accounting

Desktop Phone Web

Claim Creation

Claims Validation

RMA

RMA Management

Finance Product

Create Work Order

Track Returns

Quality

Logistics

Procurement

EDI/RosettaNet/XML/Web Services/ETL/M2M/IoT Platform

CRM Sales Analytics/Decision Support

Retail Outlet/Factory Store Smart Devices

Defect and Repair Analysis

Order Parts Replacement s

Perform Service Requests

View Device Diagnostics

Validate Warranty, Contracts

Manage Service Levels and Milestones

Claim Status Update

Customer Support Reps

Distributors and Customers

Field Service Reps

Field Technicians

Smart Devices/Sensors

Manufacturing

CRM Marketing

E-mail

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{{Figure 3

A Next-Generation Warranty System Framework

The key is to build an integrated solution that encompasses various business functions and warranty processes. This will enable critical stake-holders to gain a holistic view of warranty data from a single platform. Figure 3 below offers a conceptual architecture that demonstrates the integration required across all business functions, processes, systems, stakeholders and communi-cation channels to support this perspective.

Major Benefits

Various functional areas can realize a number of benefits from a “closed loop” made possible by a fully integrated warranty management system:

Product Development

• Early identification of flawed products and faulty components can help reduce the cost and effort involved in this process.

• The time it takes to block defective parts in inventory can be greatly reduced — freeing resources to focus on other tasks.

• Real-time availability of data pertaining to product defects helps product teams make

faster decisions on product recalls — improving customer satisfaction, as well as the company’s standing in the marketplace.

• Immediate access to defect-related data enables product design teams to apply this information when redesigning products.

• Research and development teams have more visibility into the cause of defects — allowing them to more accurately analyze problems and take the necessary steps to avoid recurring issues.

Sales

• Sales teams can take advantage of new revenue opportunities through extended warranty sales.

• With 360-degree insight into customer data, sales representatives can remain up-to-date on customer-related information.

Marketing

• Marketing personnel have the opportunity to acquire new leads for extended warranties.

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Figure 4

Determine To-Be Process

Identify Technology

Build

Change Management

Engage

Set an organization-level goal to create an integrated and seamless warranty management process. Identify key metrics for process improvements and customer satisfaction.

Assess the current IT landscape and warranty process, and identify pain points.

Architect/develop/configure an integrated warranty management solution per the to-be process and technology recommendations.

Determine whether to use an off-the-shelf warranty management product or develop a custom solution. Consider cloud, social, analytics, collaboration, digital and smart devices.

Initiate organizational change management to align people withbusiness-process and technology changes.

Engage key stakeholders throughout the implementation to effect adoption of the changes.

Strategize Change

Management

Select the Right

Technology

Redesign Process

Assess “As-Is” Technologyand Process

A Structured Discovery Approach

• With fully integrated customer information, marketing teams can better target customers’ needs and improve customer communications.

Service/Claims

• Automated fraud detection can help assure that only valid claims are processed, and lessen the need for manual intervention.

• Reducing human errors during claims processing can lead to significant cost savings.

• With a 360-degree view of customer data, service personnel can more accurately address and resolve service/claims issues.

• Service teams can turn their attention to up-selling and cross-selling products, rather than manually working their way through warranty claims processing — enabling manu-facturers to transform the service channel from a cost center to a revenue center.

• Faster supplier chargeback results in faster credit to accounts.

• Faster claims settlement leads to happier customers.

Field Service

• Detailed product documentation is immediate-ly available to field service personnel — at the customer site or the repair shop.

• Real-time access to this information makes it easier to correctly diagnose and repair defects from remote locations.

Finance

• Real-time availability of claims data enables more accurate reserve forecasting.

Looking ForwardThe proliferation of smart/connected devices and sensors that comprise the Internet of Things1 (IoT), as well as the reams of metadata generated by machine-to-machine (M2M) communications networks will offer manufacturers the level of insight needed to intelligently streamline the warranty claims process and deliver a seamless customer experience.

Figure 4 outlines the steps manufacturers must take to achieve next-generation, integrated war-ranty management and gain the benefits of a fully automated, cross-function, closed-loop process.

To gain a distinct edge over the competition, it is important that all manufacturers, particularly those in the consumer electronics and hi-tech spaces, offer a warranty plan that establishes or reinforces the company’s brand image.

We help manufacturing organizations identify and take advantage of opportunities to create more value through a structured discovery approach. Our end-to-end, KPI-driven approaches

About CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world’s leading companies build stronger business-es. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative work-force that embodies the future of work. With over 75 development and delivery centers worldwide and approximately 211,500 employees as of December 31, 2014, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.

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About the AuthorSougata Chakraborty is a Cognizant CRM Product Manager. With fifteen-plus years of experience in CRM consultancy, Sougata focuses on pre-sales and solution development, and is the acting product manager for MedVantageTM, Cognizant’s proprietary business cloud solution. He holds a Bachelor of Engineering degree in metallurgical engineering from the Indian Institute of Engineer-ing, Science and Technology (formerly Bengal Engineering College, Shibpur). He can be reached at Sougata.Chakraborty@cognizant.com.

Footnotes1 The Internet of Things (IoT) is the network of physical objects that contain embedded technology to

communicate, sense or interact with their internal states or the external environment. http://www.gartner.com/it-glossary/internet-of-things/.

and methodologies for next-generation warranty management can provide manufacturers with a definite edge over the competition while addressing key business priorities such as reducing costs, increasing after-sales revenue, enhancing customer satisfaction and loyalty, and designing products driven by real-time field data. We offer

a wide range of consulting and implementation services for companies looking to adopt the next generation of warranty management — helping all stakeholders involved benefit by working towards a common goal.

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