Save on maintenance costs with effective warranty management

For asset-intensive organisations, managing warranties effectively can minimise overall maintenance costs. Asset management software specialist COSOL calls warranty management a ‘crucial’ process to benchmark companies looking to save costs.

In a blog post, COSOL said manufacturers would typically reserve two to three percent of their sales for warranty claims, but only a few asset-intensive organisations know what percent of their maintenance spend results in warranty claims and recoveries.

COSOL said most organisations would recover less than one percent of their maintenance spend when it comes to warranty recoveries, while high performing companies would recover more than four percent of their spend.

The main challenges organisations face with warranty recovery is a lack of systematic tracking and management, which are both often done manually, if at all. COSOL identified the following complications impacting the process:

• New vs old equipment – organisations often focus on warranties for new equipment as it is easier to track based on age, while older equipment gets replaced without knowledge of component age and warranty status
• Record keeping – usually done offline, if they’re even kept at all
• Urgent repairs – quick repairs are prioritised to get equipment back up and running instead of checking if it’s under warranty first.

How to improve your warranty management process

The first step is to set up notifications for your warranty master data system to trigger alerts of any potential warranty claims. The claims however would still have to be manually researched – and in some cases, the paperwork is still completed manually and are tracked offline through spreadsheets. Any recoveries received are also processed without properly crediting the original equipment that failed.

Next is to set up a warranty claim management process, which can start identifying if warranty claims are being resolved and which suppliers are responsible for premature component failures. COSOL said this stage is often where organisations would realise the process’s complexity, suggesting a more robust solution that integrates with an ERP system like SAP that provides some automation capabilities.

Research from SAPinsider (note: Mastering SAP and SAPinsider are part of the Wellesley group of companies) found the top drivers for global organisations to modernise their enterprise asset management platforms were because their data was complex and scattered (49 percent of respondents), and to improve managing asset lifecycles and reliability (49 percent).

Best practices

COSOL identified the following components that are common in organisations that fully embrace warranty management:

• Comprehensive master data management tools – to track components, parts and equipment that are under warranty and for how long they are covered
• System-generated alerts – for both planned and unplanned equipment that captures all necessary information to review and validate a claim
• A warranty workbench – helps identify open alerts and converts them into a claim that would be communicated to the supplier
• A comprehensive claims management system – to track each claim to resolution, ensuring credits are correctly applied to the work order and the equipment that failed
• Robust reporting tools and KPIs – tracks alert and claims data by supplier, equipment and component to help analyse failures and identify areas for improvement. The tools also identify suppliers with frequent warranty claims and those who reject claims, as well as provide insights into how the claims process has been performing.

COSOL provides asset management services for organisations looking to optimise their warranty management processes, with specialists assessing current practices, reviewing master data and developing a plan to achieve warranty process excellence.