Cognizant 20-20 Insights

A Next-Generation Approach to Integrated

Warranty Management
For todays manufacturers, gaining actionable insights from customers
warranty data requires a closed-loop system that pivots around a
single version of the truth, across all business functions.
Executive Summary
Warranty management is among the most
tangible customer-facing activities offering
manufacturers the opportunity to enhance the
customer experience by automating the administration of terms and contracts. Also, warranty
information is an important source of on-theground failure data, which is critical for future
product designs.
Nonetheless, the cost of warranty management
continues to rise. High-tech and consumer
electronics companies are among the hardest
hit subject to escalating warranty management
costs due in part to rapidly falling prices, increasing
product complexity and rising demands from
quality-focused customers.
While claims continue to consume a sizable
portion of revenue earned on each sale, other
factors identifying the root cause of a product
defect, pinpointing faulty repairs and the lack of a
mechanism for timely supplier recovery only add
to costs. Distributed applications and functional
silos across the enterprise slow down claims
processing and fraud detection. Furthermore,
they do not provide the failure-related information needed from the warranty data essential
to the development of new and improved nextgeneration products.

cognizant 20-20 insights | march 2015

This white paper details critical elements of a

next-generation warranty management system,
which can help OEMs reduce the total cost of
ownership (TCO) in warranty claims processing,
and utilize data that can be used by productengineering teams to ensure the development of
high-quality products.

The Warranty Management Value Chain

The warranty management value chain typically
intersects multiple business functions within the
manufacturing organization: product development (i.e., product engineering, quality control);
product management; sales; service; supply chain
management (parts, procurement); contract
management; claims processing; finance, as well
as electronic distribution. For example:

The

product development team is responsible for the overall design and quality of the
product.

The

product management team owns the

terms and conditions of the warranty; updates
content related to the product; creates the
warranty, and assigns asset components or
individual parts to associated warranties.

The sales team uses data pertaining to terms

and conditions to remain competitive and
boost revenues.

 Service executes the promised warranty terms

and creates a job or service order. The service/

work order contains the details of the warranty
or information on the extended warranty.

Field

service reps visit customer sites and

oversee investigations or repairs, based on the
nature of the defect. Reps can also request
spare parts or replaceable product components.

Repair center technicians perform defect and

repair analyses of products that are returned

by the customer for repair or replacement.

The supply chain group plans delivery based

on replace, repair or recall requests, and

manages supplier-recovery processes.

Contract management defines the warranty

terms at the contract stage to support service
chain continuity and overall profitability.
Claims

processing takes care of warranty

claims submitted by customers and service
partners.

Finance manages the warranty reserves and

performs audits.

The warranty process flows through various

after-sales services during its lifecycle. It involves
a customer requesting a return, repair or replacement of a product, a goods receipt by the service
center or manufacturer, and repair at the service
center or manufacturers site. These steps are
followed by activities that include warranty
identification; claims submission; updating the
materials register; dispatching a product to a
customer; claims adjudication; claims credits;
supplier warranty/recovery, and chargeback.
Figure 1 below represents the processes typically
involved in warranty management.
The Challenges Manufacturers Face
Consumer electronics and high-tech manufacturers in particular encounter enormous
obstacles when attempting to increase the speed
of warranty claims processing across business
functions; utilize warranty data to analyze
product performance; assess key warranty cost
drivers; decode field-service issues, and confirm
the serviceability and reliability of products.

Electronic distributors are often responsible

for supplying design details to the manufacturer and ordering parts.

The Warranty Management Continuum

Customer/Distributor

Register Claim
Request

Dispatch Damaged/
Defective Product

Receive
Claims

Receive Replaced
Product

Create Claim

Validate
Entitlement and
Service Contract

Reject Claim
if Not Entitled

Create Work
Order

Schedule
Technician

Update
Status

Service Desk

Field Service

Figure 1

Validate Service
Response

Send Field
Technician

Perform Service
Request

Perform Defect
Analysis

Raise Parts
Request

Claims

Manually
Verify Claim

Manage Process
Claims

Manage Credit/Debit
Customer Account

Generate Settlement
Report

Finance

Invoice Claim

Manage Accounting
and Reserving

Update AR/AP

Process Payment

Plant/Repair Center

Perform Defect
Analysis

Update RCA
Database

Perform Repair
Analysis

Update BOM with

Replaced Parts

Inventory

Receive Defective
Product

Update Refurbished
Inventory

Identify New
Product

Update Defective
Product Inventory

Fix Defect With

Spare Parts

Dispatch Repaired
Product to Customer

Record
Expenses

These issues can be traced in part to:

Ad-hoc processes, including ambiguous

warranty information in service contracts,

manual claims processing, as well as financial
reconciliation and analytics procedures.

Warranty data is often retained by the

service organization, and not immediately

shared across the product development value
chain. Engineering teams have less time to
incorporate real-time information on defects
into product design.

Human-dependent warranty processes that

involve manual review and processing
of claims.

Lack of an automated process for verifying

claims with the verification system to match
claims against policies and detect irregularities often forcing companies to pay on
fraudulent and invalid claims.

Risk of under- or over-budgeting for

warranty payouts due to inaccurate forecasts.

Applying Closed-Loop Warranty

Management
Warranty data benefits numerous business
functions. It helps organizations understand
how their products perform vis--vis competitive
offerings, identify factors that affect warranty
cost and, most important, confirm the acceptability of products from a performance and serviceability point of view.
Best-in-class organizations use this data across
the warranty value chain to:

Enhance field service.

Augment return management.
Improve the repair process.
Bring needed changes to product design.
Improve recall management.
To address the challenges associated with warranty management and fully utilize the power
of warranty data, companies need to focus on
automating their processes and technologies
(see Figure 2).

A Three-Step Approach to Automating Warranty Management

Process

Align warranty strategies with business and oper-

ational strategies. Provide a longer warranty period

if your strategic objective is to use the warranty T&C
as a competitive tool. Conversely, offer a shorter
warranty period if your strategy is to generate
revenue through extended
warranty sales.

Integrate warranty management with all interfacing

business functions and systems, including:

Technology

>> Customer Relationship Management.

>> Claims Management.
>> Field Service and Supplier Recovery.
>> The ERP system for Repair and Return Management
and Claims Management.
>> PLM for Quality Improvement.
>> Decision Support Systems/BI for Decision
Automation and Fraud Detection.
>> Finance Systems for Warranty Accounting.

Change
Management

Figure 2

Incorporate warranty management into the organizations enterprise analytics and decision support systems.
Managing warranties in a reactive mode is no longer
sufficient in todays hi-tech manufacturing industry,
which is under a lot of pressure from customers high
expectations. Proactive warranty management requires

Perform organizational change management

for aligning people with process and technology

changes.

Build automated processes aided by configurable

rules and process workflows to reduce manual

intervention in different phases of the warranty
management cycle (claim validation, claim approval,
claim routing, reserve
forecasting, etc.).

analytics-driven decision support in three major areas:

>> Issue prediction, detection and warning.
>> Warranty and accrual forecasting.
>> Service parts demand management and service contract
optimization.
Based on this data, companies can foresee emerging issues and decide on potential recall, predict future warranty costs, accurately forecast spare parts demand, and
plan inventory and production accordingly.

Build a portal for submitting claims for customers and

vendors.

Build a mobile app for customers to log warranty claims

and track warranty status.

Choose industry standard B2B communication

protocols like EDI, RosettaNet, XML, etc., for integrating

enterprise, supplier and other systems involved in the
warranty management process.

Conduct training for business process owners

and supplier stakeholders on managing warranty

functions effectively.

The key is to build an integrated solution that

encompasses various business functions and
warranty processes. This will enable critical stakeholders to gain a holistic view of warranty data
from a single platform. Figure 3 below offers a
conceptual architecture that demonstrates the
integration required across all business functions,
processes, systems, stakeholders and communication channels to support this perspective.

faster decisions on product recalls improving

customer satisfaction, as well as the companys
standing in the marketplace.

Immediate

access to defect-related data

enables product design teams to apply this
information when redesigning products.

Research and development teams have more

visibility into the cause of defects allowing

them to more accurately analyze problems and
take the necessary steps to avoid recurring
issues.

Major Benefits
Various functional areas can realize a number of
benefits from a closed loop made possible by
a fully integrated warranty management system:

Sales

Sales teams can take advantage of new revenue

opportunities
sales.

Product Development

Early

identification of flawed products and

faulty components can help reduce the cost
and effort involved in this process.

The time it takes to block defective parts in

inventory can be greatly reduced freeing
resources to focus on other tasks.

through

extended

warranty

With

360-degree insight into customer data,

sales representatives can remain up-to-date on
customer-related information.

Marketing

Marketing personnel have the opportunity to

acquire new leads for extended warranties.

Real-time

availability of data pertaining to

product defects helps product teams make

A Next-Generation Warranty System Framework

{
{

Users

Channel

Warranty
Management
System

Customer
Support Reps

Web

Desktop

Entitlements

Claim Creation

Validate Warranty,
Contracts

Claims Validation
Claim Status Update

Track Returns

Field Service
Reps

View Entitlements
Manage Service
Levels and
Milestones

Field
Technicians

Retail Outlet/
Factory Store

Smart Devices

Phone

E-mail

Service

Create Work Order

Interfaces

Distributors and
Customers

Claims

Field Service

RMA

View Claims

Schedule Jobs

Process Claims

View Device
Diagnostics

RMA
Management

Settle Claims

Perform Service
Requests

Defect and
Repair Analysis

Order Parts
Replacements

EDI/RosettaNet/XML/Web Services/ETL/M2M/IoT Platform

Accounting

Finance

Manufacturing

Product

Procurement

CRM Sales

CRM
Marketing

Analytics/
Decision Support

Smart Devices/
Sensors

Logistics

Figure 3

cognizant 20-20 insights

Quality

 With

Real-time access to this information makes it

Service/Claims

Finance

Automated

Real-time

fully integrated customer information,

marketing teams can better target customers
needs and improve customer communications.
fraud detection can help assure
that only valid claims are processed, and lessen
the need for manual intervention.

Reducing

human errors during claims

processing can lead to significant cost savings.

With

a 360-degree view of customer data,

service personnel can more accurately address
and resolve service/claims issues.

Service

teams can turn their attention to

up-selling and cross-selling products, rather
than manually working their way through
warranty claims processing enabling manufacturers to transform the service channel
from a cost center to a revenue center.

Faster

supplier chargeback results in faster

credit to accounts.

Faster

claims settlement leads to happier

customers.

Field Service

Detailed product documentation is immediate-

ly available to field service personnel at the

customer site or the repair shop.

easier to correctly diagnose and repair defects

from remote locations.
availability of claims data enables
more accurate reserve forecasting.

Looking Forward
The proliferation of smart/connected devices
and sensors that comprise the Internet of Things1
(IoT), as well as the reams of metadata generated
by machine-to-machine (M2M) communications
networks will offer manufacturers the level of
insight needed to intelligently streamline the
warranty claims process and deliver a seamless
customer experience.
Figure 4 outlines the steps manufacturers must
take to achieve next-generation, integrated warranty management and gain the benefits of a fully
automated, cross-function, closed-loop process.
To gain a distinct edge over the competition, it
is important that all manufacturers, particularly
those in the consumer electronics and hi-tech
spaces, offer a warranty plan that establishes or
reinforces the companys brand image.
We help manufacturing organizations identify
and take advantage of opportunities to create
more value through a structured discovery
approach. Our end-to-end, KPI-driven approaches

A Structured Discovery Approach

Redesign
Process
Assess As-Is Technology
and Process
Assess the current IT
landscape and warranty
process, and identify
pain points.

Determine To-Be Process

Set an organization-level
goal to create an integrated
and seamless warranty
management process.
Identify key metrics for
process improvements and
customer satisfaction.

Select the
Right
Technology

Strategize
Change
Management

Identify Technology

Change Management

Determine whether to use an

off-the-shelf warranty
management product or
develop a custom solution.
Consider cloud, social,
analytics, collaboration, digital
and smart devices.

Initiate organizational change

management to align people
withbusiness-process and
technology changes.

Build
Architect/develop/configure an
integrated warranty
management solution per the
to-be process and technology
recommendations.

Figure 4

cognizant 20-20 insights

Engage
Engage key stakeholders
throughout the
implementation to effect
adoption of the changes.

and methodologies for next-generation warranty

management can provide manufacturers with
a definite edge over the competition while
addressing key business priorities such as reducing
costs, increasing after-sales revenue, enhancing
customer satisfaction and loyalty, and designing
products driven by real-time field data. We offer

a wide range of consulting and implementation

services for companies looking to adopt the next
generation of warranty management helping all
stakeholders involved benefit by working towards
a common goal.

Footnotes
1

The Internet of Things (IoT) is the network of physical objects that contain embedded technology to
communicate, sense or interact with their internal states or the external environment.
http://www.gartner.com/it-glossary/internet-of-things/.

About the Author

Sougata Chakraborty is a Cognizant CRM Product Manager. With fifteen-plus years of experience
in CRM consultancy, Sougata focuses on pre-sales and solution development, and is the acting
product manager for MedVantageTM, Cognizants proprietary business cloud solution. He holds a
Bachelor of Engineering degree in metallurgical engineering from the Indian Institute of Engineering, Science and Technology (formerly Bengal Engineering College, Shibpur). He can be reached at
Sougata.Chakraborty@cognizant.com.

About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business
process outsourcing services, dedicated to helping the worlds leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction,
technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 75 development and delivery centers worldwide and
approximately 211,500 employees as of December 31, 2014, Cognizant is a member of the NASDAQ-100,
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fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.

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