When it comes to the subject of
warranty, both manufacturers and dealers would almost certainly say their glasses are half empty.
From the dealer's point of view, many manufacturers or underwriters have implemented processes in an attempt to keep the cost of warranty down and dealers are constantly being sent reports of their performance against warranty expenditure.
Many dealers rely heavily on the money from warranty jobs to maintain the profitability of their workshops.
From the manufacturers' side the increasing competitiveness of the automotive industry is putting more pressure on finding areas that can deliver savings.
With warranty spend running into tens of millions of pounds, many car makers have focused on this area.
Despite millions being invested in manufacturing techniques and developing technology which increases reliability and quality, manufacturers'
warranty spend has increased.
So the question is, can they reduce spend while dealers maintain profitability and increase customer service levels?
Research
During the past six months Carter & Carter has been researching the area of warranty spend and believes the answer lies in what it calls “warranty waste”, which can account for up to 25 per cent of warranty spend.
Usually warranty claims can be categorised as either component failure or manufacturing defects, recalls or waste. Carter & Carter's research points to the most common factors of warranty waste being:
l Unintentional (usually found during parsing when the claim has been submitted or at the time of an audit. Most are breaches in the process)
l Intentional (fraudulent claims, well disguised and sometimes difficult to find)
l Waste (ignorance and lack of knowledge)
Other issues affecting the area of waste include:
l Repairs being carried out on vehicles with insufficient service history
l Authorisation of claims on vehicles out of the warranty period and with questionable necessity for goodwill
l Random replacement of component parts
l Claims for additional hours
l Driver abuse
Reducing waste
There is an opportunity to reduce waste and support dealers, but this can only happen with effort from both sides.
Manufacturers need to provide their dealers with the correct support and coaching to ensure that processes are understood.
This requires time on dealers' premises observing as claims are submitted, not auditing them months after the event.
The aim of this is to target warranty waste by coaching, assessing and generating action plans, careful measurement and monitoring and, most importantly, sign-off prior to claims being submitted.
This can lead to a reduction of staffing in other areas of the manufacturer's business, improved customer satisfaction and faster processing of genuine warranty claims, providing more profitable retail hours for dealers to sell.
The research demonstrated that this approach not only works but is welcomed by dealers.
Dealers need to ensure that individuals receive effective training to ensure that processes are understood, technician skill levels are maintained and improved and the right number of staff are employed in the service area.
Measuring systems
Most importantly, dealers need systems which accurately measure customer and employee satisfaction levels.
This, coupled with a genuine customer-centric approach and a robust retail business plan for the aftersales area, can lead to improved profitability.
l Matt Watson is the head of technical services and service and process at Carter & Carter.