Accenture Parts Optimization:

Warranty ServicesGaining Control Over Warranty Costs

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Beyond that, improvements around warranty can raise a brand’s value, ensuring customer loyalty and a direct impact on the bottom line. Figures vary, but companies can improve warranty costs by as much as 25 percent while boosting overall profit by up to 1 percent thanks to improvements. Despite a compelling business case, warranty services receive scant management attention. The challenges manufacturers face are manifold, but mostly center on inefficient processing caused by:

•Warrantyteamsfocusedonclaimsprocessing,not validation and analysis

•Toofewclaimsautomaticallysubmittedbydealers

•Rejectedclaimsbecauseofincompleteorinaccurate data

•Longclaimsprocessingcycle•Lowaccuracyofwarrantyreserves

A host of other issues involve high repair costs prompted by:•Ahighincidenceofinvalidclaims•Poordiagnosis(unnecessaryandrepeatedrepairs)•Highshareofno-fault-found(NFF)claims•Fewrepairedpartsinspectedandlowsupplier

recovery

And there are product quality symptoms issues like: •Alongcycleofissueidentificationandresolution•Longidentificationcyclesleadingtolargerecall

campaigns•Backlogofunaddressedproductissues

One common theme for many of these problems is the lack of robust data consolidation and analysis that would allow manufacturers to regain control of their warranty costs.

To build these advanced data collection and analysis capabilities, manufacturers must first have the right governance and processes in place—one that ensures the crisp coordination of all the parties involved along the warranty chain, from the repair network to the after sales service desk, the part supplier,andsoon.Anentirewarrantydataeco-system must be established so that parties can collect and share data readily and with minimal margin for error.

Accenture Warranty Optimization Services: Gaining Control Over Warranty Costs The numbers are compelling: On average, an automobile OEM will spend from two to three percent of their annual revenues on warranty services. For some companies, that’s the equivalent of millions or billions of US dollars. That’s only one reason why gaining control over costs is so crucial.

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WarrantyOperationsServices:Transform and Operate warranty chain at speed to enable close collaboration of all involved parties

Effective warranty management requires collaboration among different functions inside the manufacturer’s organization as well as between its repair network and parts suppliers. Ultimately, the greatest efficiencies come from having the entire warranty chain collaborate closely.

Manufacturers can leverage Accenture’s warranty chain operation capabilities to quickly and costs efficiently centralize and standardize warranty operations; increasing consistency, transparency, and control through standardized processes and analytics.

Accenture’s operations excellence and analytical services help manufacturers transform and continuously improve warranty processes and gain insights on many key warranty operations performance indicators:

•WarrantyProcessefficiency:Claimautomatedvalidation rate, claim process time, claim rejectionrate

•Quality:Repair/incidentrate,warrantycostperunit, number of issues resolved, time to detect, detection to correction time

•Financial:Actualclaimscostvs.budget,goodwillamounts vs. budget, percentage of goodwill on overall warranty costs, supplier recovery amount, percentage of warranty costs recovered from suppliers, extended warranty revenue, warranty administrationcosts,warranty/revenueratio

Figure1:AccentureWarrantyOptimizationHighLevelFramework

DealerNetwork Manufacturer Tier-1supplier Tier-nsupplier

Dealer Performance Services Early Detection Services Supplier Performance Services

WarrantyOperationsServices

Accenture Warranty Optimization Services

The proliferation of data and ever more powerful computing technologies to process it are propelling analytics to a more prominent role in warranty management. But technology is justpartofthestory.Databecomesvaluableonlywhenitisvalidatedandconsolidatedand after it’s shaped into insights, which then inform the decisions and processes that lead to better outcomes.

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Dealer Performance Services: Improving the performance of the dealer and repair network

An estimated 10 to 15 percent of warranty payments result from invalid claims or fraud, thus erodingprofits.Loweringthesecostsisachallengeto manufacturers since optimization initiatives must often involve numerous, independent and geographically dispersed dealers and repair agents.Manufacturers can leverage Accenture’s experience and global reach to collect and consolidate key dealer performance indicators leveraging heterogeneous sources of information to gain sufficient insight to benchmark dealer and repair agents in order to launch targeted improvement programs.

Accenture’s dealer performance analytical services help manufacturers create a dealer control center tracking the following KPIs:•DealerProcessefficiency:Claimsubmissiontime,

claimaccuracy,claimsvalidated/rejectedratio,parts return time

•ServiceQuality:Satisfactionwithqualityofworkperformed,“fix-it-right-the-first-time”percentage for warranty repairs, promise date adherence

•PolicyAdherence:Warrantyrepaircostpervehicle vs. peers, repair effectiveness vs. peers, warrantyrepairtypesvs.peers,percentageofNoFaultFound(NFF)vs.peers,percentageofoutofwarranty repairs and goodwill.

•Financial:Goodwillamountandpercentage

Dealer performance improvement programs can typically generate warranty costs savings of 5 to 10 percent.

Figure 2: Accenture Dealer Performance Improvement Services

CollectedInputs Accenture Dealer Analytics Outcomes

• Warrantyclaims

• Repairinformation

• Social media data

• Customersurveys

• Audit history

• Industry benchmarks

• Turnkey industry analytical models

• Industry expertise

• Standard KPIs

• Regionalandlocaldealertrainings

• Improved claim validation rules

• Targeted dealer audits

• Continuousandgranulardealer benchmarks

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Supplier Performance Services: Improving parts suppliers performance and supplier recovery

Whilefinishedgoodsareoftenassembledfromparts purchased from third party suppliers, manufacturers typically only recover 15 to 25 percent of their warranty repair costs from parts suppliers. Improving supplier recovery is often a challenge since it requires collecting and analyzing repair and parts defects information from a disparity of repair agents before costs can be claimed back from parts suppliers.

Manufacturers can leverage Accenture’s supplier analytics and parts expertise to segment supplier parts and benchmark suppliers to gain sufficient

insight to launch targeted supplier improvement programs like supplier reviews and parts diagnostic training programs.

In particular, Accenture’s industry specific analytical services help manufacturers monitor and act upon the following suppliers’ performance indicators:•Processefficiency:Supplierrecoveryrate,

recovery claim processing time, part inspection cycletime,no-fault-foundratevs.peersofthesame part family group

•Quality:Repair/incidentrate,warrantycostsperpart,no-fault-foundperpart,numberofissues resolved, detection to correction time, non-conformingmaterialspercentage

•Financial:Actualsupplierclaimscostvs.budget

Supplier performance improvement programs can typically generate warranty costs savings of 5 to 10 percent.

Figure 3: Accenture Supplier Performance Services

CollectedInputs Accenture Parts Supplier Analytics Outcomes

• Warrantyclaims

• Replacedpartsinformation

• NFFreports

• Supplier audit history

• Parts family benchmarks

• Parts expertise

• Supplier performance analytical models

• Standard Supplier KPIs

• Parts analysis labs

• DealerdiagnosticsandNFFimprovements

• Targeted supplier audits

• Continuousandgranularpartssuppliers benchmarks

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Early Detection Services: Improve quality of parts and components through analysis of after sales information to quickly identify recurring quality issues.

Latedetectionofproductdefectsmayleadtolargerrecalls, increased warranty repair costs and may cause customers to switch brands, which reduces distribution channel profitability and requires more resources to acquire new customers.

Manufacturers have typically used dealer focus groups and warranty claims analysis tools to identify recurring quality issues. To reduce the time taken to detect problems, Accenture leverages analytical tools to sort through new sources of nearreal-timeinformationfromsourceslikesocialmediaandon-boardtelematics.

Accenture’s experience and reach can be leveraged to build a global, reactive surveillance system, collecting and consolidating masses of quality information, analyzed to identify statistically significant exceptions in failure rates.

Key performance indicators used are:•Processefficiency:Numberofopenissues,

number of open root cause analysis•Quality:Problemdetectiontime,detectionto

correction time, product and parts perceived quality index

•Financial:Averagerepaircostperqualityproblem, warranty reserve accuracy

Early detection services can typically help manufacturers reduce quality problem detection times by 50 percent and generate warranty costs savings of 10 to 15 percent.

Figure 4: Accenture Early Detection Services

CollectedInputs Accenture Early Detection Analytics Outcomes

• Warrantyclaims

• Social media sonar

• Customercomplaints

• Product launch dealer panel

• On-boardTelematics

• Turnkey quality analytical models

• Industry expertise

• Standard quality detection

• Engineering services

•

• Nearrealtimemonitoringofquality issues

• Qualityissuestrackedfromoccurrence to resolution

• Rootcauseanalysistracking

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Benefits to manufacturersEffective warranty optimization programs can generate overall warranty costs savings of up to 25 percent.

WithAccenture’sWarrantyOptimizationServices,manufacturers benefit from:•Accenture’ssignificanttrackrecordproviding

warranty operations and optimizations programs as a managed service in the auto, heavy and industrial equipment industry.

•AccentureWarrantyOptimizationassets:•Multi-lingual,warrantyoperationsdelivery

centers•Abusiness-led,technology-drivenwarranty

analytics approach that is software and hardware agnostic

•Industryspecificanalyticstemplatestocompilewarranty KPIs from heterogeneous data sources (warrantyclaims,socialmediafeedback,on-boardtelematics,customersurveys,historicalauditresultsandsoon…)

•Anetworkofover5,000analyticsprofessionalswith over 500 professionals with advanced analytics skills

•Accenture’sglobalscale,provenexperienceandcumulative learning from global and local warrantyprojects

•Accenture’sabilitytoquicklyengageregional/local country teams to manage warranty optimizationprograms(dealerperformanceprogramsforexample)inregionswithsignificantcultural or language differences

WarrantyInformation

Store

Figure5:WarrantyOptimizationPotentialBenefits

Figure6:EnterpriseWarrantyAnalysis

$M

Illustrativeexample:Auto/Industrial

equipment manufacturer with $10B in

annual revenue and with warranty

expenses at 2.5% of revenues.

0

50

100

150

200

250

300

BaselineWarrantyCost

$250M

Warrantyoperations

optimization

$2M

Dealer performance

improvements

$5M

Supplier performance

improvements

$19M

Early quality problems detection

$30M

Optimized WarrantyCost

$190M⧋∆$60M}

CRMData

Dealer Data

Product Data

Sales Data

Claims

CorrectiveActions

Supplier Audits

Dealer Audits

TechnicianHotlines

CustomerSurveys

WarrantyBusinessRules&Processes

EnterpriseWarrantyAnalysis

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Companiescanimprovewarranty costs by as much as 25 percent while boosting overall profit by up to 1 percent thanks to improvements.

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Intrigued?

Accenture is committed to helping its clients achieve high performance. To find out more about how Accenture can help you meet your business imperatives and create a road map for high performance, contact:

contactAPO@accenture.com

About Accenture

Accenture is a global management consulting, technology services and outsourcing company, with more than 244,000 people serving clients in more than120countries.Combiningunparalleledexperience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them becomehigh-performancebusinessesandgovernments. The company generated net revenues of US $25.5 billion for the fiscal year ended Aug. 31, 2011. Our Internet address is www.accenture.com

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