BPM-EAI

1. What are the main cost drivers in Warranty management from your experience and how can they be controlled?

   Setrag: There are a number of challenges in Warranty Claims management. The two, often conflicting, objectives are controlling the cost of managing warranties and improving the customer experience in Warranty claims management. A related challenge is controlling the entire supply chain for managing cost, quality and responsiveness. There is also a regulatory and compliance cost for accurately predicting future warranty outlays to set aside the correct capital. The main approach in controlling and improving warranty claims management is automating the entire spectrum of policies and procedures within these challenges, through a Warranty Claims BPM suite solution.

   Sudripto: This is a great break-up of the warranty cost contributors by Dr. Setrag. To add some more indirect costs - we need to account for the transactional costs of warranty operations, the logistics costs of warranty returns and the cost of capital when warranty managers block huge warranty reserves which leads organizations to obtain external debt for meeting their additional working capital requirements.

   For global organizations having sales of their warranty secured products across multiple continents and countries, the transactional costs and reverse logistics costs are huge. Some of the Hi-tech consumer goods and telecom device manufacturers have to hold close control of their operational costs. Managing a balance between reserves and actual warranty spend is a forecasting aspect, fraught with inherent issues of errors of estimation. The best way to manage these costs is to develop an agile warranty management system, which captures trends early and provide feedback for timely adjustment of warranty policies and procedures. I would add to Dr. Setrag’s remarks, and say, that an integration of the BPM suite based claims management with the warranty claims analytics system would be the recommended solution.

2. What are the typical expectations of a Warranty Management Solution from a customer perspective?

   Sudripto: First of all it is necessary to define the customer. It could be the service provider or dealer or service station, the extended warranty insurer and/or the end user of warranty secured products.

   Take the case of the customers of warranty who are the end users of the products. As against automobile consumers who have initial period of free-of-cost warranty replacement assurance, consumer experience of high-tech and other construction equipment is based on the warranty that is “bought” during buying the product. A higher cost of warranty package would lead to a threat perception of the product’s reliability and may adversely impact the product’s sale.

   Ideally, to convince customers to buy products backed by reliable performance and assured claims management service, organizations should have efficient claims management system which improves visibility across the claims management process with a blend of manual and automated claims management.

   Setrag: As noted above, the customer experience in managing warranty claims is critical. Looking at the customer complaints generated by the service providers and dealers, usually the warranty agreement is based upon cryptic agreements and rules on executing the claim. Potential of errors in processing claims or misinterpretations are considerable.

   The other end of the customer experience is processing the Warranty which often includes third party suppliers and the overall service for the claim. Since these players are third party players in the warranty arena, the wide range of coverage and the ease of settlement of claims drives favorable customer perception.

   As Sudripto suggests above,all these three areas are best addressed through automated and controlled policies, procedures and end-to-end processes involving different parties - through a BPM Suite. The BPM suite can directly capture the procedures and policies (business rules) of warranty claims management and also automate both the claims as well as the ability to apply the most appropriate policy for a given context

3. What are the various ways in which people and process integration have improved warranty performance?

   Setrag: One of the challenges to Warranty management is the fact that traditional warranty approaches have been inflexible, with either mostly manual processing or having warranty rules ossified and buried in code. The modernization of the warranty claims management through a robust BPM suite solution is key to improving the visibility, automation, and overall continuous improvement of warranty claims processing. The involvement of the business to discover and define warranty rules directly has been critical in manufacturing organizations that have deployed BPM based warranty improvement solutions. The business policies and procedures get typically harvested from multiple “legacy” systems. With BPM the organization gets complete visibility as well as a platform that can easily introduce or change new rules and/or processes for end-to-end management of warranty claims.

4. Why is there an increasing need for agility in Warranty Claims Management? Does this relate to continuous improvement?

   Setrag: There are several aspects of “agility.” While executing the warranty claims, several unexpected events could arise. So it needs to be processed in a controlled fashion - while having the flexibility in handling the events in the context of the warranty case for the customers. Thus this aspect is the dynamic case management capability that is essential to handle unexpected events or situations. The other, perhaps even more important aspect of agility, is the ability to quickly introduce new decisioning policies, or specific specializations for new products, new suppliers, new markets, new customers, jurisdictions etc. - and be able to execute the most appropriate policy or procedure for a given context.

   Sudripto: As explained by Dr. Setrag, agility manifests as flexibility and scalability. In addition, there should be efficiency of operations and granular standardization of processes which enables high degree of re-use. It is not just a matter of continuous improvement but continuous adaptability to changing market needs.

Hear more from Dr. Setrag and Sudripto De on “How Agile is your Warranty Claims Management Process?” at the Warranty Chain Management Conference on March 17 at 13:15 PST.