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Controlling Warranty Costs with a Closed Loop Quality Management System

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-See how to cut warranty costs and reduce warranty accruals while enhancing product quality and customer satisfaction.

-Learn how a major automotive manufacturer has saved a significant amount of time and money with warranty management.

-Understand the key to enhancing product quality, reducing returns and warranty costs, is adoption of an effective warranty management software solution.

Visit IBS America, Inc. for more information:

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Controlling Warranty Costs with a Closed Loop Quality Management System

  1. 1. Logo Only Slide Controlling Warranty CostsStephenCummings IBS 2011 THE PRODUCTIVITY ADVANTAGE
  2. 2. Controlling WarrantyCosts with Closed Quality Management System OverviewLoop QualityManagement
  3. 3. How much is Warranty costing us? According to Warranty Week, in 2010, the total amount of warranty accruals reported by all U.S.-based warranty providers was… $14.8 Billion $22.8 Billion $28.8 Billion IBS 2011 THE PRODUCTIVITY ADVANTAGE
  4. 4. Warranty Cost PressuresHighly competitive markets  lower priced products  lower profitmarginsIncrease in product complexity leads to increased numbers of problemsIncreased customer expectations for high qualityDecreased product life-cycles (i.e. re-design frequency)Corporate governance (SEC requirements) IBS 2011 THE PRODUCTIVITY ADVANTAGE
  5. 5. Some actual numbers: Warranty Accruals (in $ millions)$1,600$1,400$1,200$1,000 $800 $600 2009 $400 2010 $200 $0 Percent of Sales 3.50% 3.00% 2.50% 2.00% 1.50% 2009 1.00% 2010 0.50% 0.00% *(Warranty Week posted numbers) IBS 2011 THE PRODUCTIVITY ADVANTAGE
  6. 6. Warranty Costscosts Used Part New Part Costs Costs (Zero Mileage) Supplier Design Mgt Production WarrantyRequirements Prototype O/G Shipping Inspection Rework • Returns Scrap • Recalls Chargebacks IBS 2011 THE PRODUCTIVITY ADVANTAGE
  7. 7. Warranty Cost Element Warranty Repairs Parts & Materials Claim Validity Problem Re-occurrence efforts Problem detection Problem Prevention IBS 2011 THE PRODUCTIVITY ADVANTAGE
  8. 8. How do these numbers come together1) Management Total Warranty Decisions Warranty  Customer Analytics Cost  Competitor Analytics 3)Service  Product Life Cycle Delivery Costs Analytics-Driven 1) Warranty 2) Product Terms & Reliability & Conditions Responsibility Quality-Driven Warranty Costs Level 1 Cost RESPONSE DETECTION Level 2 Cost Elements & PREPERATION Corrective FMEA Quality Control Action & Level 3 Cost & Control APQP Elements • 8-D Plan Inspection • 7 Steps IBS 2011 THE PRODUCTIVITY ADVANTAGE
  9. 9. How do these numbers come together Warranty Service Delivery Costs *Source: PRTM group IBS 2011 THE PRODUCTIVITY ADVANTAGE
  10. 10. Long term impacts: Loss of Reputation Higher Warranty Accruals Higher Inventory Costs Lower Sales  Reduced Market Share IBS 2011 THE PRODUCTIVITY ADVANTAGE
  11. 11. How can warranty software help to reduce those numbers?Align inter-departmental and cross-functional communicationsStreamline the IT landscape by using an common, single data repositoryAutomate warranty management and claims processesAccess to warranty related data & KPI’s anywhere and anytimeReduce the cost of quality improvement effortsTie Warranty Management to the QMS to improve product quality to preventrepeated defects IBS 2011 THE PRODUCTIVITY ADVANTAGE
  12. 12. Example: Automotive Supplier Identify systemic problems: multiple repairs, parts of other manufactures Quick search for specific defects, defect location, root cause, parts numbers etc. Automate plausibility checks to identify invalid claims for long term cost reductions Cost reduction and transparency by elimination of heterogeneous systems Simplified ad hoc reporting with integrated data Identify “accepted” and “rejected” claims for further customer negotiations Lessons Learned data base: share problem resolutions and experiences Reduction of cycle times per issue Elimination of duplicate entries Add. Reports are possible, e.g. 3 Panel (R/1000), Pareto, Time-in-Service (TIS; MOP; MIS) Ability to easily interface with ERP, e.g. SAP to automatically pull information to reduce administrative burden IBS 2011 THE PRODUCTIVITY ADVANTAGE
  13. 13. Warranty Decision-making E(Reworked)– E(Scrapped)+ E(Chargebacks)_________________ Potential Value of a Return Shipping & Admin Cost to Return IBS 2011 THE PRODUCTIVITY ADVANTAGE
  14. 14. Sample Warranty Management Claims Management Process: Automotive SupplierSample sizeof parts to be Various means of acquiringinspected warranty data - Offline (Excel & Email) - Online - Field services (Web Portal) 1 Global Warranty cases Import Log on to the central *Cyclical 3 Management information System provided by IBS customers e.g. in form of Quality excel Management X number of cases documents 2 Portal  Company Reporting: 4 E-Mail  Company  by Industry  by country  Costs  Product related KPI’s IBS 2011 THE PRODUCTIVITY ADVANTAGE
  15. 15. CA/PA Process supporting Lessons Learned & Elimination of repeated defectsCustomer Claim data (Excel) OEM 1 OEM 2 8D OEM n IBS: Converter tool IBS 2011 THE PRODUCTIVITY ADVANTAGE
  16. 16. Typical Questions Typical sample questions that can be answered:  Cost analysis: Warranty per customer (Field)  Failures per month/year  Failures by industry or market segment – commercial vehicles, passenger cars, etc.  ppm per customer (based on deliveries)  Where did the parts fail (Countries, Plants, etc.)  Estimates based on statistical sampling of how many parts are really at fault (basis for the negotiations with a customer – especially surrounding the technical factor calculations) IBS QSYS Evaluations: 4  by Market  by Country  Costs  KPIs  accepted vs. rejected claims IBS 2011 THE PRODUCTIVITY ADVANTAGE
  17. 17. Sample Reports: Drill-Down Reporting Highest ranked failing part and Claims by year defects causing disruptions in 2008 Top 5 Customers Top 10 returns from this Customer Top 5 defects on this Item IBS 2011 THE PRODUCTIVITY ADVANTAGE
  18. 18. IBS reporting tool PPM Defective by Month Manufactured Pareto of Defects 400.0 TW broken in balancing area 1 350.0 No Fault Found 5 BW 300.0 Nut torque 5 R/1000 Defective BW Incorrect Assembly 6 250.0 Noise 1 200.0 Blow By 1 150.0 FOD 7 Daimler 100.0 Customer Damage 4 50.0 TW broken Blade 6 0.0 Oil Leaking by the compressor side 36 4 5 6 7 4 5 6 7 8 4 5 6 7 8 4 4 4 5 5 5 6 6 6 7 7 7 8 TW broken 1/2 25 l-0 l-0 l-0 l-0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 0 0 0 0 0 n- n- n- n- n- ov ov ov ov ay ep ay ep ay ep ay ep ay ar ar ar ar ar Ju Ju Ju Ju Ja Ja Ja Ja Ja M M M M M N N N N M M M M M S S S S Build date 0 5 10 15 20 25 30 35 40 Root Cause Monthly Volume Contained 1235 1764 1483 1044 PCA 276 296 635 799 828 862 816 594 308 606 672 492 0 0 Location Problem Serial Aug-05 May-05 May-06 Nov-05 Sep-05 Dec-05 Feb-05 Jun-05 Feb-06 Jun-06 Mar-05 Apr-05 Mar-06 Apr-06 Jan-05 Jan-06 Oct-05 Jul-05 Total Open / Number or D3 D4 D6 Brief Problem Description 8D # Closed Date for Permanent Corrective Action Taken PCA No Fault Found 79 Field 2 7 12 10 9 6 9 3 2 3 3 2 3 2 6 - - - - - - - ITEC Customer Damage 8 Field 3 2 1 1 1 - - - - - - - Shaft & Wheel brokem 15 Field 2 8 3 2 4751 E E E closed 8/8/2006 Re-validate the weld process WG Arm Broked 5 Field 1 4 - - - - - - - E E E Increase stock material in the casting to avoid Pinched O-ring 4 Field 1 1 2 2208 closed 10/5/2006 component misalign E E E Snap Ring Out of Position Comp.Wheel All K-16 and K-27 must pass through the balancing 2 Field 1 1 5278 Open 05/29/2006 rubbing machine BW WG Corroded 1 Field 1 - - - - - - - WG Arm Frozen 1 Field 1 - - - - - - - Broken Fin 1 Field 1 - - - - - - - Missing the mounting flang 1 Field 1 - - - - - - - Oil Inlet pipeline leaking 0 Field 5675 Open IBS 2011 THE PRODUCTIVITY ADVANTAGE
  19. 19. Alternative entry points via Web PortalCustomer Claim data (Web Portal) IBS: Reporting Tool IBS 2011 THE PRODUCTIVITY ADVANTAGE
  20. 20. Summary of Integrated Warranty Management Warranty Cost Management • Claim Reporting • Claim Validation • Better accrual forecasting • Centralized database Warranty Cost Prevention • Integrated Feedback • 8D, 7-Step, etc. • Lessons Learned • Engineering Change • Supplier Management IBS 2011 THE PRODUCTIVITY ADVANTAGE
  21. 21. About IBS IBS Baltic UAB IBS AG IBS SINIC GmbH IBS America, Inc. IBS Shanghai, Ltd.Founded 1982 Headquarters:Employees 200Customers > 4.000 in 18 countries Automotive (OEM and supplier)Industries Plastics and metal industries Electronics/medical technology industries IBS 2011 THE PRODUCTIVITY ADVANTAGE
  22. 22. Key Competences and PositioningOverview IBS‘s key competences: Innovative Integration with Services software solutions enterprise IT systems Directors MIS Implementation ERP Training Compliance Management MES Solution-oriented Company mgmt. Process integration control Industry-independent Production Machine control Process consulting Quality Production Management Management Implementation Operation Maintenance IBS 2011 THE PRODUCTIVITY ADVANTAGE
  23. 23. IBS Customers:Automobile and Construction Industry IBS 2011 THE PRODUCTIVITY ADVANTAGE
  24. 24. Customer Examples:Electronics and Semiconductors IBS 2011 THE PRODUCTIVITY ADVANTAGE
  25. 25. IBS Customers:Industrial Suppliers IBS 2011 THE PRODUCTIVITY ADVANTAGE
  26. 26. Successful Projects and Satisfied Customers OEMs Automotive Suppliers IBS AG/BAK 2009 (40% of Top 100 ®2008/IBS AG BAK are customers) Broad Customer Base in Segments like: Plastics, Metal, Electronics, Medical devices, Process industry IBS 2011 THE PRODUCTIVITY ADVANTAGE
  27. 27. Questions? Logo Only Slide Next Step: Contact IBS For a Complimentary Gap-Analysis P:781.862.9002 E: info@ibs-ag.com W: www.ibs-us.com Stephen Cummings IBS 2011 THE PRODUCTIVITY ADVANTAGE

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