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      2 min read

      Controlling and Reducing Parts Cost in Warranty Claims

      Replacement Parts cost have been represented to be as much as 60% or more of the warranty claim expense. Studies indicate that up to 15% of the parts cost is excessive. 

      The excessive cost may be related to:

      • Replacing good parts leading to NTF (No Trouble Found) issues
      • Replacing parts when they can be repaired at a lower cost
      • Replacing more parts because of incorrect diagnosis
      • Claiming unnecessary or non-eligible parts such as wear parts
      • Submitting of fraudulent claims or using of non-OEM parts

      Warranty experts from Mize have compiled a list of strategies to help you control the parts costs in claims:

      1. Validate parts used on a repair by using the relationships such as component code to parts maintained in the Parts Catalog
      2. Validate parts against Parts Orders from the service center by linking to the specific replacement parts order or invoice
      3. Check against claim parts statistics such most frequently used parts for same failure, part failure rates, and average parts cost for similar failures
      4. Implement and enforce warranty policies to prevent non-eligible parts, and parts not covered under warranty such as wear items being claimed
      5. Implement business rules and fraud detection framework to validate the repairs, parts, and repair procedures. Risk scores on claims and dealers help to make the right decisions during claim processing
      6. Capture pictures of failed parts and diagnostic files along with a claim to validate the failures, and proper diagnostic and repair procedures are being used
      7. Auto-order replacement part from claims to replenish inventory
      8. Provide recommendation of repair procedures and parts to the technicians before the repair work is performed
      9. Simplify access to all service knowledge to help technicians make the right diagnostic and repair decisions
      10. Use claim pre-approval process for certain repairs and dealers with a high-risk score to validate that right repair procedure, and parts are being used
      11. Establish parts return policies and procedures to get a sample of parts back to perform inspections and quality analysis
      12. Collaborate with suppliers in cost recovery and quality analysis. Track No-Trouble-Found (NTF) parts and identify improvements to diagnostic and repair procedures
      13. Implement barcodes, serialization of parts to identify and track parts being replaced and the new parts used. Having a detailed as maintained Bill-of-Material (BOM) by product serial number provides many benefits with validations, supplier recovery, and service decisions.
      14. Use remanufactured parts to reduce the cost of replacement parts on warranty claims
      15. Collaborate with parts department to reduce the cost of parts procurement, logistics, and inventory based on analysis of warranty claims and supplier recovery data.

      Claim Decisions using Business Rules

      All of these strategies can be implemented cost-effectively using the right warranty management software. You can improve the quality of claims data while improving the efficiencies of claims processing.

      Mize Warranty Management Solution has flexible business rules, built-in validations, and connections with Parts Catalogs, Parts Orders, Returns, Supplier Recovery, Inspections to help you control and reduce the parts costs on warranty claims.


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      Mize Inc.

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