The “Warranty & Good Will” cost-cutting campaign for an automotive manufacturer facilitated the short-term reduction of W&GW settlement within the course of the year.
In today’s economic situation, reliability management in companies is faced with numerous challenges. Increasing requirements regarding the safety and reliability of end products are the result of the demands and requirements of the global competition such as high innovation pressure, ever more complex products and technologies, a large variety of products and shortened development and production times. Apart from the fact that these aspects pose increasing qualitative challenges for companies, they also pose numerous risks. In times of economic and financial crises, and in a growing competitive environment, quality and reliability aspects are becoming more and more important due to customers’ differentiated and increasing demands when taking purchasing decisions. As a result of customer requirements, manufacturers (OEMs) are intensifying their own requirements to products and processes in their own value-adding chain. These intensified requirements therefore also have an immediate impact on warranty and goodwill costs, because inadequate product reliability negatively impacts the financial year-end result. Companies can and must therefore distinguish themselves from and position themselves within the competitive environment through a high level of product and process quality.
The specific task
At a manufacturer from the automotive industry:
- To develop effective measures in order to reduce W&GW outflow during the year
- To identify the levers necessary to reduce W&GW outflow
- To establish structures and measures for specific cost reduction
- To initialise and establish a capabilities concepts for regular implementation of short-term W&GW cost reductions
KBC Solution approach
Higher or increasing W&GW outflow can result in significantly exceeded W&GW costs during the year vis-à-vis the provisions. These excess costs are specifically caused by a lack of transparency and analytical methods in the W&GW settlement environment, as well as by overly high W&GW costs on account of long error location times and inefficient repair processes. This frequently results in unjustified settlements (e.g. anomalies across the various markets) vis-à-vis the OEM due to the lack of specifications and standards for the dealers. In this specific case and after the provision of required W&GW data and their analysis, KBC was able to identify the major fields of action, identify the root causes and generate appropriate remedial measures for the short-term reduction of W&GW costs during the course of the year, all within three months. In order to reach a quick decision regarding these measures, we conceptualised and implemented sustainable management and control processes.
Realisation of potential
By identifying the levers to reduce the W&GW outflow (the optimisation of repair costs, a reduction in parts prices and handling costs, the prevention of settlement anomalies, the creation of dealer settlement standards and the reduction in error location times), the company was able to determine a W&GW cost savings potential of 1 million Euro within a very short period and positively influence the provisions or the company result during the course of the year. Through the fact-based process of selecting the right levers, KBC was able to provide the automotive manufacturer with an effective collection of measures. The project’s success was complemented by the methodological capability to reduce W&GW costs in the short-term as well as by the W&GW outflow reporting process established in a department.