Practical example
Initiation, implementation, and monitoring of a quality initiative to reduce warranty costs
Establishment of comprehensive management and controlling processes as part of a quality initiative at a leading premium automobile manufacturer.
Background
In the automotive industry, the impact of poor product reliability is reflected in the profit and loss (P&L) statement of the annual financial statements. Today, steadily rising warranty and goodwill costs are the primary and most tangible driver behind the launch of projects aimed at optimizing quality and reliability. A key factor in the success of such optimization initiatives is the simultaneous and balanced implementation of product and process measures. The core challenge in reducing warranty costs lies in the strategy’s ability to create the political and financial leeway for such optimization projects. For decisions regarding the implementation of quality measures, it is therefore both essential and possible to demonstrate profitability through business cases.
Specific task
- Identify measures to reduce warranty costs
- Establish management and controlling processes (program and environment)
- Initiate optimization measures and evaluate them from a business perspective (costs and benefits)
KBC's Approach
In addition to analyzing and identifying quality measures based on systematic, cross-functional vulnerability maps, we were able to support our client with our many years of experience in launching and managing large-scale optimization initiatives. The key success factors in the initial phase were defining the scope and direction of the projects, as well as establishing a calculation methodology to quantify the monetary benefits of quality-enabling measures based on detailed warranty data.
In addition, we worked with our client to professionalize the decision-making processes within the quality management system, which in many companies are driven by the controlling function. Faster implementation of measures, combined with quantitative data on benefits and costs as well as transparency regarding goal achievement, could only be achieved by establishing a decision-making body at the top management level and involving all functional areas.
Impact achieved
Through the implementation and consistent application of quality measures on the customer’s side, we have achieved a significant reduction in warranty and goodwill costs (~50%) since 2004. For years, we have served as our customer’s right-hand partner and have supported the expansion of this successful model by consistently raising reliability targets.
