For OEMs, warranty costs currently take up a large slice of a company’s total costs. In particular, technical initiatives such as recalls frequently increase warranty costs significantly in the short term. While the focus of warranty cost optimisation is usually on material and wage costs, an additionally significant cost driver remains unconsidered: Handling costs.
Apart from spare parts and labour costs, handling costs are also playing an increasingly significant role today, particularly when it comes to warranty costs. The term handling costs can be understood as all charges in addition to the parts price that arise in warranty cases through the provision of spare parts to the dealers in the field. In concrete terms, handling costs can comprise logistics, storage and other provisioning costs. The level of handling costs is usually based on a percentage surcharge to the parts price, which can occasionally amount to more than 20%.
The specific task
- A specific (short-term) decrease in warranty costs within the course of the year through a significant reduction in handling costs.
KBC Solution approach
To facilitate your company’s handling cost optimisation, we will obtain a detailed overview of your spare parts portfolio and invoicing procedures with your dealer network during a first step in order to identify major cost drivers. During a subsequent step, we will determine “traditional” warranty parts, i.e. those spare parts with a warranty ratio of more than 80%. We will then determine the optimum parts price for these parts. This will allow us to reduce your handling costs without adjusting the percentage surcharge. Apart from incorporating this reduction in product management, i.e. actually implementing the reduced parts price, we will also handle the development of a monitoring system which allows you to continuously track your warranty settlement rates in order to readjust the parts price, if necessary.
Realisation of potential
We will get more return for you. Whereby our focus is on a reduction in handling costs. Keeping these as low as possible while maintaining high warranty rates. A sustainable reduction of parts prices facilitates a reduction in handling costs of up to 20% (recognised in net profit or loss).