Kevin Hogan of Accenture talked about how implementing a warranty system can drive harmonization and competitive advantage. His focus was on a recent case where they helped a company implement an SAP-based Warranty solution. The case is a global heavy equipment manufacturer with about a focus on Europe and North America. They were running 4 different warranty systems driven by both geography and brands (the company has several). They selected SAP because they had a vision for a larger SAP footprint and because it offered integration (not especially for its functionality). Although they realized that there would be a significant investment in customization they felt that the TCO would be good because of the overall drive to adopt SAP.
From a business perspective, they had a number of issues across the regions and brands:
- Warranty spend too high
- Inconsistent policies
- Manual claims processing (for 150,000 claims a year)
- Payment of claims was not integrated with warranty systems
- Lack of control on warranty expenditure
- Spurious product quality data (multiple coding approaches for instance)
- Supplier recovery was poor
- Dealers found the process burdensome
Implementing SAP allowed them to harmonize and integrate a lot of their processes. They:
- Consolidated coding of problems
One of the most important and hardest things to do while keeping it rich enough to be useful and simple enough to be used by the dealers
- Harmonized warranty policies and repair time allowances
Created some analytics to improve the repair time allowances over time
- Developed parts return process
Facilitated direct ships for dealers to return parts to the original supplier rather than through the OEM
- Put all the dealers on the same SAP-based system
- Integrated registration with retail settlement to increase registration rates
- Automated claim validation at time of entry
Both form validations (data fields) and then policy validation to help ensure that the dealers get a valid claim submitted first time
- Automated some claim adjudication and processing
Reduced average claim processing time from weeks to days, gradually increasing the number of claims being auto-adjudicated. They started with 0% and after about 5 months they are at 15-20% – gradual is key.
- Integrated claims and credit documents for reconciliation
The project delivered some things that were competitive advantage for the company including:
- Quickly add new and tailored offerings
Building on the catalog of existing warranty elements and pushing across all brands and regions
- Higher quality product
Primarily through better reporting of problems
- Stronger collaboration
With dealers, with parts suppliers and with insurance company managing extended warranties through real-time online systems and portals
They found that you really need executive support, as usual. For a multi-brand company it is important to get agreement on policies (across brands, across geographies) first before working on the system – only allow variations that are justified by a value driver, not just because different groups want to do things differently. Finally, focus on the high value items first because the budget/project may not last as long as planned and you need to get the important things done first!
I particularly agree with his recommendation to start small with auto-adjudication and gradually increase the scope of the rules you use for that. This is both good organizational advice and easy to do with a business rules management system.