The ENG’s 3rd annual Automotive Warranty Management USA, sponsored by Mize, took place on Oct 16th and 17th in Dearborn, MI. The event attracted over 110 warranty leaders from the automotive industry. This blog post summarizes the key themes, presentations, metrics, best practices, and technologies discussed during the conference.
All major Automotive OEMs such as BMW, Fiat Chrysler, Ford, Honda, Hyundai, Kia, Mazda, Mercedes-Benz, Nissan, Toyota, Volkswagen, and Volvo trucks are represented at the conference. In addition to the OEMs, this year’s event also included warranty managers from many component or part suppliers such as Adient, American Axle, Bendix, Bosch, Cummins, Dana, Dyson, GKN, Inalfa, Magna, Nexteer, SGS, SKF, Tenneco, and Valeo. Even though the clear majority of companies are representing passenger cars or light vehicles, the companies in commercial vehicles and equipment such as Bendix, Bobcat, Cummins, and Volvo Trucks were also in attendance. Even though dealers were not present at the conference, many presentations discussed the important role dealers play in warranty management.
This year's event is taking place at an important inflection point in the automotive industry with the recent developments in autonomous, electric, and connected vehicles, and growing new business models of ride-sharing and mobility. More people attended this year than in previous years indicating more interest in taking control of warranty costs while preparing for an uncertain future with new technology developments.
Key themes for automotive warranty management
The main theme of this year’s event was “Creating warranty programs and practices that drive customer satisfaction and continuous improvement.” The topics ranged from establishing efficient warranty processes, reducing No Trouble Found (NTF) issues, and managing Goodwill and Recalls. Some of the presentations addressed the issue of controlling warranty fraud, dealer audits, technician training, and quality of claims data.
The recall discussion was dominated by the scope and extent of the recent Takata airbag recall which affected millions of consumers across almost all car brands. BMW shared about the extent companies go to identify the owners to complete the recall.
The warranty cost recovery from suppliers by OEMs always creates tension in identifying the ways to share data, but most discussions focused on improving collaboration to reduce warranty costs and improve product quality.
At the end of two days, some common principles and themes emerged out of all presentations and discussions:
- Warranty is about customer satisfaction and retention whether you are working on claims, recalls, or goodwill
- Collecting, sharing, and leveraging of the warranty data is the most important aspect of improving warranty processes
- Even though there are issues with trust between OEM and dealers and OEM and Suppliers, the warranty improvements can benefit all stakeholders including customers, dealers, OEMs, and suppliers
- Warranty departments are taking advantage of mobile, IoT, advanced analytics, and AI/Machine learning to make better decisions and improve efficiencies
Key presentations and case studies
It is refreshing to see that the most companies are willing to share their initiatives and practices. Especially interesting are the case studies presented by major companies in the industry and here is a quick summary of the key presentations.
1. Warranty and customer satisfaction by Toyota
Toyota shared the goal of the claims processing systems as allowing dealers to provide better service to the customer by paying quickly and in real time. Toyota introduced a mobile app for field reps to authorize repairs. The app helped improve approval time reducing delays and improving customer satisfaction. Toyota also implemented a Bot called Herschel (named after the pet dog) to help automate claims using AI and machine learning. The results showed the Bot better than human processors.
2. Effortless experience and accurate reimbursement by Cummins
Cummins shared the case study about the system to quickly assess repair estimates and guide technicians through the repair. The Guidanz mobile key and app enables immediate assessment of repair estimates and parts, and automation of service processes. Cummins presentation is a good example of all stakeholders benefitting from the system by improving product uptime, customer satisfaction, process efficiency, and technician productivity.
3. Ensuring a Smooth Warranty Claims Process by Mercedes-Benz
Mercedes-Benz presentation was about the use of Connected Vehicle Data Will Improve Communication Across the Value Chain that includes customers, dealers, OEM, and Suppliers. The data from checks or inspections by Factory, Vehicle Process Center (VPC), Pre-Delivery Inspection (PDI), and Warranty can be analyzed to identify process improvements.
4. Integration of shared pictures in Warranty Parts logistics chain by Volkswagen
Volkswagen’s case study shared how shared digital pictures can help reduce the need for costlier and time-consuming parts returns. Remote inspection of failed parts would allow the verification of the problem with visual or optical defects. Using the digital information in lieu of physical goods flow helps to reduce the cost and time involved in claim processing as the parts shipping adds days or even weeks to claim process.
5. Working together to reduce warranty and ‘No Trouble Found (NTF)’ by Mize
The workshop conducted by Mize discussed the need for platform strategy instead of a pipeline model, bridging the data gap between the stakeholders, and enabling the technicians to reduce warranty cost and NTF. Mize shared about case studies from OEM, Suppliers, and dealer technician perspective.
6. Supplier warranty practices presented by Tenneco and Valeo
Tenneco and Valeo in separate presentations shared the supplier perspective on warranty. Tenneco shared about a case study with an OEM to address the quality issue after analyzing claims data and returned parts. Valeo shared that speed of filed issue detection as the key to operate in a global market with advanced technologies. Both companies made a case for OEMs to share the complete data with suppliers quickly to help reduce issue detection to correction cycle time.
Warranty KPIs and Metrics
As the saying goes “what gets measured gets improved”. KPIs (Key Performance Indicators) and metrics are always an important topic and here are some of the KPIs that came up during various presentations:
- Fixed First Visit: The percentage of times the issue was resolved during the first repair by dealer. Repeat repairs result in customer dissatisfaction, higher costs for both OEM and dealers.
- Completion Rates on Recalls: The number of vehicles fixed under a recall as compared total impacted population. NHTSA is expecting a 100% completion rate on safety recalls, but it is hard to achieve based on the inability to locate and get all owners to bring the car for repair.
- Days Down: The number of days the vehicle was not suitable to drive while waiting for the repair to be completed. The cost of loaner or rental vehicles goes up, and customer satisfaction goes down if it takes more days to get the right parts to complete the repair. The parts shortage is an acute problem, especially when dealing with large recalls when customers are notified in advance of having the right replacement parts.
- Customer Satisfaction: Customer satisfaction as measured by surveys or ratings & reviews is one of the most important metrics as the main goal of Warranty to satisfy and retain the customers. Customer satisfaction scores, dealer service ratings, and detailed metrics on warranty performance are good feedback mechanisms to improve warranty continuously.
- Approval time: The time it takes to approve the repair request or a warranty claim after the dealer has submitted it. The average approval time indicates the efficiency of warranty processing and impacts customer and dealer satisfaction. Most claims are approved in real-time while allowing the processors to focus on exceptions and anomalies. The business rules, AI/Machine learning, claim bots, remote inspection, and IoT data analysis are all the techniques companies are employing to reduce the approval time.
- Supplier recovery rate: The cost of warranty claims recovered from a supplier from OEMs for component or part failures. The overall supplier recovery rate for automotive industry ranges between 13% to 16% according to Warranty Week report.
- Supplier warranty performance: OEMs may set the warranty performance criteria in terms of warranty cost as compared to parts purchase amount or expected failure rate. OEMs have warranty recovery rates based on claims reaching the warranty performance thresholds set with the suppliers.
Best Practices in Warranty Management
One of the key aims to attend an industry event like Automotive Warranty Management is to learn about the best practices from each other. Here is a summary of the best practices discussed during this conference:
Dealer Peer grouping: Dealer benchmarking is used identify above average use of repairs, repair frequencies, and warranty anomalies. Instead of comparing dealers nationally, they can be clustered into groups based on various criteria such as units in operation, geography, number of technicians, and size, etc. Various statistical methods can be used to create the right peer groups and provide a better comparison between dealers instead of using the national average. Peer grouping comparison is also used to select the dealers to be audited. Nissan shared about their peer grouping methodology being implemented.
Remote Assist: With the growth of mobile phones with cameras, remote assistance using live video and Augmented Reality (AR) can be used by contact center agents, claims processors, and return centers. Remote assistance provided to technicians can help make better diagnostic and repair decisions, inspect parts remotely reducing shipping costs, and train the technicians.
Technician mobilization: Enabling technicians with a mobile app can reduce duplicate data entry, capture better diagnostic and repair information, and assist technicians in making better decisions. Product service history recommended repair procedures and parts, and remote assistance help improve technician productivity, reduce warranty costs, and improve customer satisfaction.
Technologies impacting Warranty
Many advanced software technologies impact efficiencies in warranty processes, help make better decisions and identify emerging quality issues. Here is a summary of new applications and use cases with new emerging technologies.
Warranty use cases and applications
Claim Authorization by Field Reps, Technician enablement, shared picture, and video, Remote assistance
IoT or connected cars
Predictive Maintenance, On-board diagnostics, advanced data analytics
AI and Machine Learning
Fraud detection, Claim Automation, Predictive failures, Text analytics
Emerging issues, Root cause analysis, Dealer and claim risk scoring, Suspicious claim or fraud detection
Augmented Reality (AR)
Remote Assistance, Knowledge, Technician training
Even though a number of software vendors presented about AI and Machine learning in claims processing and data analysis, the companies seem to think of those as more future applications. Many automotive OEMs has announced the launch of fully autonomous vehicles, and robot taxis are starting early 2019. But most participants are uncertain about the impact of autonomous vehicles on warranty. As the autonomous, electric, and connected cars evolve in the coming years, the warranty teams need to prepare for huge changes in business models and all processes.
Companies can realize tangible benefits by executing on some the ideas and best practices identified during the conference. Mize Connected Customer Experience platform, and Warranty Management solution enables Automotive OEMs and Suppliers to streamline warranty processes, reduce warranty costs, improve collaboration among all stakeholders, and enhance customer satisfaction.