Advertisement

Blog

Who Warrantees the Products You Buy?

One of the key advantages to buying components through an authorized distributor is the pass-through warranty. In other words, an authorized distributor can automatically guarantee the same quality and support of a product as the original manufacturer.

This is a key differentiator in the channel for authorized distributors — while other channels will take back and replace defective parts, only an authorized distributor can act on behalf of the supplier, repairing, replacing, or sending back defective parts directly to the manufacturer's factory.

Components makers want to protect their brands by making sure they are not associated with counterfeit or substandard parts that are passed though the channel with their brand name attached. The same holds true for finished products: Brands have to make good on their promises and their warrantees if customers are going to continue to associate their brands with high quality.

These are reasons why I found a recent report by IDC Manufacturing Insights so surprising. The report reveals that while most product companies recognize the criticality of effective warranty management practices, very few companies are addressing the problem effectively.

Key findings from the survey include:

  • Most product companies do not consistently benchmark their warranty organizations, with less than 20% of companies even benchmarking internally.
  • Low product quality and poor warranty coverage and repair can significantly tarnish a brand. However, only a little over half of leading companies and less than 20% of laggards use warranty management proactively to improve their brand image.
  • Nearly all (92%) of leading companies are pursuing opportunities to improve accrual management, but only 61% of laggard companies do.
  • Approximately 60% of leading companies employ proactive means to improve warranty performance through the use of fraud detection methods and early quality warning systems. Less than 20% of laggard companies do.

According to Joe Barkai, practice director for IDC Manufacturing Insights' Product Lifecycle Strategies research service, “the manufacturing industry's ability to drive warranty improvement is minimal.” He said:

The use of benchmarking to assess performance and implement continuous improvement is disappointedly low and the application of IT tools to manage warranty transactions, perform warranty and quality analysis, and improve financial management is very inconsistent. Until now, the industry has not had a set of best practices to rely upon.

I know in the components arena, suppliers measure distributors' on-time delivery, accuracy and quality on a continual basis. The total quality management (TQM) revolution in the 1980s vastly improved both manufacturers' and distributors' quality performance and helped companies established their own performance benchmarks within their organizations. In finished goods, however, I wonder if outsourcing has had an impact on benchmarking and warranty performance. Many OEMs also rely on their EMS and ODM partners to ship and support finished products.

It's unclear from the IDC study where exactly the warrantee process is being measured. Some OEMs still directly support their products through their own repair services: {complink 8019|General Electric Co.} appliances still have their own repair people; {complink 4907|Sharp Electronics Corp., {complink 5114|Sony Corp.}, and Dremel (these are just a few companies I've dealt with recently — I am sure there are many more) require consumers to ship defective products back their factories.

For the most part, I've been happy with warrantee support from these companies. I've been less happy with some furniture, where the warrantee on the frame is 5 years but the materials (in this case, leather) are only covered for 1 year. This is because two different companies are responsible for supporting those particular products.

Purchasing professionals: How comfortable are you with the warrantee coverage you receive with your purchases? Let us know on the message board below, or write to us at .

12 comments on “Who Warrantees the Products You Buy?

  1. FLYINGSCOT
    May 19, 2011

    I believe not many companies see the warranty cycle as a strategic opprotunity.  Some have figured this out, like Kia Motors who believe they could drive business by offering the “best warranty in the business” with their 7 year offering.   Their task is now to juggle the cost of claims with the extra revenue from sales.  Other companies (I will not mention specific names) have made a complete shambles of it.  Case in point was a premium $300 golf club returned with a broken graphite shaft after only 1 month. Customer was told that the shaft is only covered for the length 4 inches abover the head and 4 inches below the grip but not in the middle which is the part that broke.  I wonder what “word of mouth advertising” will now do for this particular company.  Bottom line is “the warranty business” should be treated as a strategic opportunity for growth and not as an afterthought.

  2. hwong
    May 19, 2011

    you are right. I think that if people can feel “secure” about their car becaus of the ease of it being fixed, they are more likely to buy the products without worrying. I think Korean cars have made such a big comeback because of their high quality and the warranty they are offering. It used to be that Korean cars are crappy and they break down all the time. Now is really the time to buy time. A few years from now their quality will drop because they no longer need to win the market share.

  3. AnalyzeThis
    May 19, 2011

    @Flyingscot, good point about car warranties, that's the first thing I thought of: many car manufacturers still tout and promote their warranties, so I think anyone who says that warranties are no longer relevant is probably mistaken.

    That being said, I do think in the tech space that warranty policies are often ignored, especially by consumers.

    Anyhow, warranty coverage isn't something I generally consider in purchasing because I obviously only try to deal with suppliers who provide quality products. If the failure rate of my purchases seemed unusually high or even slightly noticeable, I would probably switch to a new supplier regardless of their warranty policies: ideally, warranty policies are non-factors because you should never get to the point where you need to utilize them.

    I'm generally comfortable with the warranty coverage of the products I buy and if something is obviously wrong, it usually shows up right away and is dealt with promptly.

  4. mfbertozzi
    May 20, 2011

    I was trying to correlate editorial from Barbara and very interesting posts from everybody, this way: the article mention TQM and examples reported bring car manufacturing. Furthmore here at EBN we have discussed several times about outsourcing and manufacturing delocation. TQM reached the success from Toyota at the time of corporate's production not delocated or outsourced. Nowadays the picture is really different: end user buys a product of which components have been produced abroad and each one producer is responsible in terms of warranty for that. Is TQM still valid?

  5. SunitaT
    May 21, 2011

    @FLYINGSCOT, I agree with you. Moreover efficient warranty process opens the door for additional revenue opportunities through optional, extended and custom warranty programs.

  6. itguyphil
    May 21, 2011

    Correct. Like alot of people will attest, when you buy a product, it's not really about what you get up front that consumers carer about. It's all about the service and support you receive afterwards that makes people loyal to companies.

  7. SP
    May 21, 2011

    The product normally fails when warranty is about to expire. Although i personally keep all the warranties in safe place but its nrmally nt available when you need it. Also sometimes the cost of using warranty is also high than to buy the product again.

  8. itguyphil
    May 21, 2011

    Well that's just Murphy's Law.

    As far as renewing, I say if you go with a 'decent' warranty option, it might beprudent NOT to renew the warranty. For example, if you buy a computer today and get a 3-yr warranty, by the time the warranty is up, it is probably in your best interest to consider replacing the machine if the cost of extending the warranty is near or more than the cost of a new machine (with a new warranty option).

  9. Himanshugupta
    May 22, 2011

    @Flyingscot, the case of golf club is a good example of how companies and shop try to rip the consumer. I agree with you that mouth advertisement of such deeds can bring bad image to companies but it actually does not happen as only small portions of items are defective. This actually is government's responsibilty to protect consumers from such companies who do not live up to their claims.

  10. Hardcore
    May 22, 2011

    Perhaps I would be inclined to rank traceability higher than warranty, potentially because even with a warranty you can still end up with several hundred thousand defective products on the  market, and whilst the warranty may cover you up to a certain extent, it is unlikely to ever come close to full reimbursement for all losses.

     

    With traceability you gain something extra, and that would be a guarantee of proper component storage and handling,  as a result the failure modes and reliabilities of mass produced products can be more easily calculated,  more importantly you will find that most manufacturers of components will have a disclaimer in their warranty that  excludes incorrect storage/ handling of their products, i have seen this used in the past by some manufactures/distributers to exclude them from responsibility should the product be found to have failed.

    There are also issues related to correctly identifying product/component failure trends, without proper traceability incorrect conclusions can easily be arrived at

  11. unobstructed
    May 23, 2011

    We are pleased you provided visibility into our IDC study and recent press release on IDC's new industry Warranty Management Capability Maturity Model and wanted to provide some additional clarification. We agree that companies can have good customer service and warranty coverage but at the same time our research shows that many companies are inefficient in doing this and pay dearly in warranty costs.   Our study comprised of responses from product companies/OEM's/brand owners and suppliers from across the globe with varying company sizes. The industries that participated included Automotive, A&D, Heavy Equipment, Farm Construction, Industrial Machinery, HVAC, White Goods, Consumer Electronics, Computers, Data Storage, etc.   We began this research because of what we were seeing the SEC data we track on warranty claims cost in the US.  Manufacturers spend anywhere from 0.5% to 7% of product revenue on warranty claims, which represents about $23B of opportunity in the US alone. Additionally, we found that warranty cost variability is high within industries and year over year within a single company.  (Folks who are interested in receiving a complimentary copy of our Annual Warranty Spend Report are welcome to contact me at sbrennan@idc.com.)  The objective of our study was to identify companies that were more advanced in their view of the importance of investing in warranty improvement versus those who view warranty as a necessary evil and an afterthought.  We looked at the practices, metrics, organizational structures and technologies in place for these companies, versus the actual performance data such as cycle time to process a claim, etc.  Benchmarking of the warranty operation, whether internal, against peers or partners or other industries, interestingly did rate low, however this is not to be confused with a companies' tracking the performance of their CM's, suppliers and distributors.  The output of IDC's study validated the need for an objective framework for companies with warranty operations (specifically the OEMs/Brand Owners setting the warranty Ts&Cs) to assess their maturity and provide them with a way to develop a continuous improvement roadmap. Hence we developed the CMM. I hope this provides clarification for you and your readers. We held a webconference on May 5th and the play back is available for anyone interested in learning more.  Thank you for your forum Barbara.   – Sheila Brennan, Program Manager, IDC Manufacturing Insights

  12. mario8a
    May 24, 2011

    Hi

    unfortunately there are only a few companies that offer the warranty based on robustness and realiability data, often they look at their competitors and if they say 5 well now the company will have to say 6 or 7 months or years.

    many times in the industry I asked the factories I visited “where did you get this #? how did you define it? and what background information you have?

    many times the answer goes back to “is what we have documented” but there's no further analisys of data from the filed and where there is some information it's not fully understand.

    Regards

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.