controlling warranty costs with a closed loop quality management system
DESCRIPTION
-See how to cut warranty costs and reduce warranty accruals while enhancing product quality and customer satisfaction.-Learn how a major automotive manufacturer has saved a significant amount of time and money with warranty management.-Understand the key to enhancing product quality, reducing returns and warranty costs, is adoption of an effective warranty management software solution.Visit IBS America, Inc. for more information:TRANSCRIPT
THE PRODUCTIVITY ADVANTAGEIBS 2011
Logo Only Slide
Controlling Warranty
CostsStephen Cummings
Controlling Warranty Costs with Closed Loop Quality Management
Quality Management System Overview
THE PRODUCTIVITY ADVANTAGEIBS 2011
How much is Warranty costing us?
According to Warranty Week, in 2010, the total amount of warranty accruals reported by all U.S.-based
warranty providers was…
$14.8 Billion
$22.8 Billion
$28.8 Billion
THE PRODUCTIVITY ADVANTAGEIBS 2011
Warranty Cost Pressures
Highly competitive markets lower priced products lower profit margins
Increase in product complexity leads to increased numbers of problems
Increased customer expectations for high quality
Decreased product life-cycles (i.e. re-design frequency)
Corporate governance (SEC requirements)
THE PRODUCTIVITY ADVANTAGEIBS 2011
Some actual numbers:
Caterpil-lar
Ford TRW Cummins Eaton GE0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
Percent of Sales
2009
2010
Caterpillar Ford TRW Cummins Eaton GE$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Warranty Accruals (in $ millions)
2009
2010
*(Warranty Week posted numbers)
THE PRODUCTIVITY ADVANTAGEIBS 2011
Warranty Costs
Requirements
Design
Prototype
Production
O/G Inspection
Warranty
Shipping
costs
New Part
Costs(Zero Mileage)
Used Part
Costs
• Returns
• Recalls
Rew
ork
Scr
ap
SupplierMgt
Chargebacks
THE PRODUCTIVITY ADVANTAGEIBS 2011
Warranty Cost Element
Warranty RepairsParts & MaterialsClaim ValidityProblem Re-occurrence ef-fortsProblem detectionProblem Prevention
THE PRODUCTIVITY ADVANTAGEIBS 2011
1) Management Warranty Decisions
Customer Analytics
Competitor Analytics
Product Life Cycle
How do these numbers come together
Total Warranty
Cost
3)Service Delivery
2) Product Reliability & Responsibility
1) Warranty Terms &
Conditions
Costs Analytics-Driven
Quality-Driven Warranty Costs Level 1 Cost
DETECTIONRESPONSE
&PREPERATION
Quality Control&
Inspection
Corrective Action
• 8-D• 7 Steps
FMEA&
Control Plan
APQP
Level 2 Cost Elements
Level 3 Cost Elements
THE PRODUCTIVITY ADVANTAGEIBS 2011
How do these numbers come together
Warranty Service Delivery Costs
*Source: PRTM group
THE PRODUCTIVITY ADVANTAGEIBS 2011
Long term impacts:
Loss of Reputation
Higher Warranty Accruals
Higher Inventory Costs
Lower Sales Reduced Market Share
THE PRODUCTIVITY ADVANTAGEIBS 2011
How can warranty software help to reduce those numbers?
Align inter-departmental and cross-functional communications
Streamline the IT landscape by using an common, single data repository
Automate warranty management and claims processes
Access to warranty related data & KPI’s anywhere and anytime
Reduce the cost of quality improvement efforts
Tie Warranty Management to the QMS to improve product quality to prevent repeated defects
THE PRODUCTIVITY ADVANTAGEIBS 2011
Example: Automotive Supplier
Identify systemic problems: multiple repairs, parts of other manufactures
Quick search for specific defects, defect location, root cause, parts numbers etc.
Automate plausibility checks to identify invalid claims for long term cost reductions
Cost reduction and transparency by elimination of heterogeneous systems
Simplified ad hoc reporting with integrated data
Identify “accepted” and “rejected” claims for further customer negotiations
Lessons Learned data base: share problem resolutions and experiences
Reduction of cycle times per issue
Add. Reports are possible, e.g. 3 Panel (R/1000), Pareto, Time-in-Service (TIS; MOP; MIS)
Ability to easily interface with ERP, e.g. SAP to automatically pull information to reduce administrative burden
Elimination of duplicate entries
THE PRODUCTIVITY ADVANTAGEIBS 2011
Warranty Decision-making
E(Reworked)
– E(Scrapped)
+ E(Chargebacks)
_________________
Shipping & Admin Cost to Return Potential Value of a Return
THE PRODUCTIVITY ADVANTAGEIBS 2011
Sample Warranty Management Claims Management Process: Automotive Supplier
Sample sizeof parts to be inspected
Global Warranty cases
Various means of acquiring warranty data
- Offline (Excel & Email)- Online
- Field services (Web Portal)
Log on to the central
ManagementSystem
IBS
Quality
Management
Data replication
X number of cases
*Cyclical information provided by customers
e.g. in form of excel
documents
Portal CompanyE-Mail Company
Import
Reporting: by Industry by country Costs Product related
KPI’s
1
2
3
4
THE PRODUCTIVITY ADVANTAGEIBS 2011
CA/PA Process supporting Lessons Learned & Elimination of repeated defects
Customer Claim
data
(Excel)
OEM 1
OEM 2
OEM n
8D
IBS: Converter tool
THE PRODUCTIVITY ADVANTAGEIBS 2011
Typical Questions
Typical sample questions that can be answered:
Cost analysis: Warranty per customer (Field)
Failures per month/year
Failures by industry or market segment – commercial vehicles, passenger cars, etc.
ppm per customer (based on deliveries)
Where did the parts fail (Countries, Plants, etc.)
Estimates based on statistical sampling of how many parts are really at fault (basis for the
negotiations with a customer – especially surrounding the technical factor calculations)
IBS
QSYS
Evaluations: by Market by Country Costs KPIs accepted vs. rejected claims
4
THE PRODUCTIVITY ADVANTAGEIBS 2011
Sample Reports: Drill-Down Reporting
Top 5 Customers
Claims by year
2. Drill Down FORD
Top 10 returns from this Customer
1. Drill Down 2008
Top 5 defects on this Item
3. Drill Down Lock Asy
Highest ranked failing part and defects causing
disruptions in 2008
THE PRODUCTIVITY ADVANTAGEIBS 2011
IBS reporting tool
PPM Defective by Month Manufactured
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
Build date
R/1
000 D
efe
cti
ve
Mo
nth
ly
Vo
lum
e
0 0 276
296
635
799
1235
1764
1483
828
862
816
594
308
606
672
1044
492
Co
nta
ined
Ro
ot
Cau
se
PC
A
Brief Problem Description
To
tal
Pro
ble
m
Lo
ca
tio
n
Ja
n-0
5
Fe
b-0
5
Ma
r-0
5
Ap
r-0
5
Ma
y-0
5
Ju
n-0
5
Ju
l-0
5
Au
g-0
5
Se
p-0
5
Oc
t-0
5
No
v-0
5
De
c-0
5
Ja
n-0
6
Fe
b-0
6
Ma
r-0
6
Ap
r-0
6
Ma
y-0
6
Ju
n-0
6
8D # D3
D4
D6 Open /
Closed
Serial Number or
Date for PCA
Permanent Corrective Action Taken
No Fault Found 79 Field 2 7 12 10 9 6 9 3 2 3 3 2 3 2 6 - - - - - - -
Customer Damage 8 Field 3 2 1 1 1 - - - - - - -
Shaft & Wheel brokem 15 Field 2 8 3 2 4751 E E E closed 8/8/2006 Re-validate the weld process
WG Arm Broked 5 Field 1 4 - - - - - - -
Pinched O-ring 4 Field 1 1 2 2208 E E E closed 10/5/2006Increase stock material in the casting to avoid
component misalignSnap Ring Out of Position Comp.Wheel rubbing
2 Field 1 1 5278 E E E Open 05/29/2006All K-16 and K-27 must pass through the balancing
machine
WG Corroded 1 Field 1 - - - - - - -
WG Arm Frozen 1 Field 1 - - - - - - -
Broken Fin 1 Field 1 - - - - - - -
Missing the mounting flang 1 Field 1 - - - - - - -
Oil Inlet pipeline leaking 0 Field 5675 Open
BW
ITE
C
Pareto of Defects
25
36
6
7
1
1
6
5
5
1
4
0 5 10 15 20 25 30 35 40
TW broken 1/2
Oil Leaking by the compressor side
TW broken Blade
Customer Damage
FOD
Blow By
Noise
BW Incorrect Assembly
Nut torque
No Fault Found
TW broken in balancing area
Daim
lerBW
THE PRODUCTIVITY ADVANTAGEIBS 2011
Alternative entry points via Web Portal
Customer Claim
data
(Web Portal)
IBS: Reporting Tool
RMA
THE PRODUCTIVITY ADVANTAGEIBS 2011
• Claim Reporting• Claim Validation• Better accrual forecasting• Centralized database
Warranty Cost Management
• Integrated Feedback• 8D, 7-Step, etc.• Lessons Learned
• Engineering Change• Supplier Management
Warranty Cost Prevention
Summary of Integrated Warranty Management
THE PRODUCTIVITY ADVANTAGEIBS 2011
IBS America, Inc.
IBS AGIBS SINIC GmbH
IBS Baltic UAB
IBS Shanghai, Ltd.
Founded 1982
Employees 200
Customers > 4.000 in 18 countries
Industries Automotive (OEM and supplier)Plastics and metal industriesElectronics/medical technology industries
Headquarters:
About IBS
THE PRODUCTIVITY ADVANTAGEIBS 2011
Key Competences and PositioningOverview
Services
Implementation
Training
Solution-oriented integration
Industry-independent Process consulting
IBS‘s key competences:
Innovative software solutions
ComplianceManagement
QualityManagement
Production Management
MIS
MaintenanceOperationImplementation
Machinecontrol
ERP
Process control
MESCompany mgmt.
Production
Directors
Dat
a fl
ow
Integration with enterprise IT systems
THE PRODUCTIVITY ADVANTAGEIBS 2011
IBS Customers:Automobile and Construction Industry
THE PRODUCTIVITY ADVANTAGEIBS 2011
Customer Examples:Electronics and Semiconductors
THE PRODUCTIVITY ADVANTAGEIBS 2011
IBS Customers:Industrial Suppliers
THE PRODUCTIVITY ADVANTAGEIBS 2011
IBS AG/BAK 2009
®2008/IBS AG BAK
OEMs
Broad Customer Base in Segments like:
Plastics, Metal, Electronics, Medical devices, Process industry
Automotive Suppliers(40% of Top 100 are customers)
Successful Projects and Satisfied Customers
THE PRODUCTIVITY ADVANTAGEIBS 2011
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Questions?
Stephen Cummings
Next Step: Contact IBS For a
Complimentary Gap-Analysis
P:781.862.9002
W: www.ibs-us.com