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Warranty Capability Model Published

Last week was a big week in Warranty. IDC Manufacturing Insights not only published the Warranty Management Capability Maturity Model, but we held a webcast entitled "The Way to Becoming a Warranty Warrior" which described the details of the Capability Maturity Model (CMM) and also reviewed the industry field study results which showed the clear separation in maturity markers of the leaders, or "Warranty Warriors" from the laggards, or "Warranty Wannabees".

The increasing technological, manufacturing, and operational complexities product companies face take a toll on product quality and subsequently on warranty costs. While organizational investment in the warranty domain has resulted in financial improvement, IDC Manufacturing Insights' research and analyses clearly show that a fundamental and systematic effort has to be undertaken to address the issue. We believe that the industry needs to develop and adopt a maturity capability model to assess warranty operations and outline a road map for continuous improvement. Manufacturers will need to define corporate governance and local rules for their warranty organizations. These efforts should be complemented by plans to invest in warranty governance structures and dedicated warranty management technologies to help control and reduce warranty costs.

Key findings from our worldwide study, conducted in conjunction with our friends at WarrantyWeek.com, include:

  • Most product companies do not consistently benchmark their warranty organizations, with less than 20% of companies even benchmarking internally.
  • Low product quality and poor warranty coverage and repair can significantly tarnish a brand. However, only a little over half of leading companies and less than 20% of laggards use warranty management proactively to improve their brand image.
  • Nearly all (92%) of leading companies are pursuing opportunities to improve accrual management, but only 61% of laggard companies do.
  • Approximately 60% of leading companies employ proactive means to improve warranty performance through the use of fraud detection methods and early quality warning systems. Less than 20% of laggard companies do.

In light of the fact that manufacturers spend anywhere from 0.5% to 7% of product revenue on warranty claims (in the United States alone, this represents approximately $23 billion of opportunity to the industry), more attention must be given to the overall warranty process.

Manufacturers need to consider assessment methodologies to evaluate their warranty management organizations and moreover should plan to invest in governance structures and technologies to minimize the impact of warranty events, decreasing reaction time and associated costs, and to have better control over the variability of response.

For more information on the Warranty Management Capability Maturity Model, please read the report (subscribers only) or listen to the free replay of the webcast by clicking here (registration required). As always, we want to hear about your warranty journey, what's working and what's not, and we welcome community discussion.

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