The automotive industry, already hit by the worldwide manufacturing industry recession, loses millions each year on warranty claims. Business intelligence software, however, can manage the entire warranty process - reducing costs and improving customer satisfaction.
Some major manufacturers are beginning to focus on analysing warranty costs, and warranty performance is beginning to be regarded as a key strategic issue.
"When done right, warranty analysis allows manufacturers to reduce warranty costs, protect their brands, and make strides toward continued, improved customer satisfaction," says Bruce Jones, sales manager for the Commercial Sector at SAS Institute SA, leaders in business intelligence.
Most manufacturers now give warranties on vehicles for a certain period of time, or the first 100 000km. Their dealers carry out any necessary repairs, and claim the costs back from the manufacturers. This process, however, raises many issues, is subject to fraud, and can be costly if not properly managed.
In the US, warranty issues are estimated to cost more than $8.5 billion annually. The Word on Warranties estimates that the amount spent on repairs and service for goods under warranty is over $25 billion to $28 billion worldwide. The overall market, although considered still in its infancy, is experiencing 19% growth.
According to a recent AMR report, the automotive industry loses almost $500 per vehicle on warranty claims in the US. While some warranty claims are paid to maintain customer satisfaction only, by far the majority are related to some perceived defect in the vehicle or a component.
According to the Wall Street Journal, GM spends about $3.5 billion a year paying dealers to fix things that break on GM vehicles under warranty in North America, where the company's typical warranty lasts three years. (Source: GM Takes Tips From CDC To Debug Its Fleet of Cars, Wall Street Journal - 8 April 1999). Despite dramatic improvements in new-vehicle quality at most major car makers over the past decade, industry executives say warranty costs may be the single largest area left for potential cost reductions.
Business intelligence software can manage the warranty process, reducing costs through realistic modelling of the warranty process and proper warranty analysis.
"A good solution will systematically reduce claim volumes, capping warranty costs and improving customer relationships," says Jones.
SAS Warranty Analysis has been designed to manage the entire warranty process, and is now used by several vehicle manufacturers worldwide. The analytical software integrates warranty data with key customer, vehicle, production, and geographic information, allowing organisations to achieve a level of knowledge that translates into significant value.
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