Is your business sitting on a warranty gold mine?
By Michael Zink
Warranty is one of the rail industry’s dirty secrets. Most rail agencies are generally supportive of good warranty management as an ideal, but few have the systems and business practices to effectively execute a warranty program in place. Thousands of dollars slip through the fingers of rail organisations every year due to unrecovered warranty claims.
Warranty coverage attaches at the time of purchase to an overall asset, components and/or individual parts of a product. Warranties may have different rules, conditions and claims processes, but the premise is always the same regardless of whether you’re dealing with a traction motor, gear box or air-conditioning unit: the product will perform at a certain standard for a minimum length of time. If the product fails to do this, repair or replacement will be at the expense of the supplier.
Many businesses pay for repairs on items covered by warranty because they simply don’t know a warranty claim is available. They may even be paying for additional coverage and still not make use of this cover. Ineffective warranty administration has seen companies opting to wear the costs for minor repairs themselves because the process to make a claim seems like an ineffective use of resources. When a claims process is considered too complex or arduous, it can feel as if it simply costs more than it is worth.
The good news is that you can have an immediate impact on your bottom line if you take a few steps to implement a comprehensive warranty process.
How much do you lose if you don’t claim your cash?
The Gartner Group report on Enterprise Asset Management (EAM) found that a modern EAM system can conservatively increase warranty recovery by 50%. Very aggressive warranty recovery using advanced, automated warranty claim recovery processes can yield even higher increases, with the rail industry ‘gold standard’ being 1-2% of the initial asset purchase price. That’s a lot of moolah to miss out on.
However, it’s hard to manage something you can’t easily monitor. Considering the sheer volume of assets, vehicles and components public transport players own and operate, it’s not surprising that they may have trouble with warranty recovery. In fact, without proper record-keeping, it’s impossible to calculate the potential savings from utilising warranties – let alone to actually make those savings.
The rail industry faces a further set of challenges in coordinating maintenance on components and individual assets without disrupting services. With so many moving pieces, different types of infrastructure and an unforgiving delivery schedule to uphold, keeping track of which parts of each asset are under warranty is a complicated task.
Letting warranties overwhelm your staff invariably results in financial losses for repairs that should be compensated. Even companies who are tracking expenses may not be aware of missed reimbursement opportunities if the information is hidden away in filing cabinets or hard-to-access spreadsheets. Knowing exactly where each asset and component is in its warranty period and how to quickly lodge a claim can result in significant cost savings.
Getting warranty claims right
The key to effective warranty recovery goes back to the old ‘3-legged stool’ analogy: people, process and system. You need all three to be in place, or else the stool will tip over.
The ‘system’ you need is an EAM solution with automated warranty claim functionality. The ‘people’ aspect refers to the fact that you need to dedicate part (or all) of someone’s job to be a trained Warranty Administrator. If you are part of a large rail company, you may need to have multiple people on your warranty team. The ‘process’ is for your warranty team to utilise the claim data captured by your EAM system to get reimbursement from your vendors.
In a perfect world, as soon as an asset or component breaks, the owner and maintenance team would be alerted to the warranty status and have immediate access to the claim process details. In reality though, when a fault occurs the focus is often on repairs and getting operations running again. Searching through a folder of warranties is simply not a priority when things break in a public transport operation.
This is where a rail-specific EAM software can make a significant difference to rail operators. A good EAM solution not only keeps track of valid warranties, but also simplifies the claims process by incorporating advanced features. For example, it should be able to document all corrective maintenance activity with the 3 C’s (Complaint, Cause and Correction) – bonus points if your internal codes can be mapped to the vendor’s own 3 C’s coding convention. This standard approach means all warrantable work order data can be easily translated into the coding ‘language’ that your suppliers require to quickly process your warranty claims.
The Trapeze EAM software was designed for the complexities of a public transport network and streamlines the process between a fault occurring, repairs being undertaken and the warranty claim being completed. By recording asset, component and parts details with their warranty information inside a centralised system, the user is immediately notified if a warranty applies when a fault occurs.
For example, a work order for repairs on a warranty-covered item will automatically trigger a claim notification. From here, the reimbursement claim can easily be created and submitted for payment from the same screen.
With this system in place, businesses will notice quick wins and immediate differences in the claims management process. Inefficiencies in the maintenance and materials departments can be corrected by managing warranty administration within the EAM system.
Getting a warranty administration system in place
The most organised individuals among us may be on top of the warranties for the products within their own household. They may have a folder of paperwork to track their recent purchases and warranty periods. In a single home this is manageable, but multiply that by the many items that make up an asset-intensive business like rail operations and the difficulty in managing warranties without suitable software becomes clear.
When it comes to business, the bottom line counts. Missed opportunities for refunds are an easily avoidable expense with the right tools in place.
If you think your business processes could be streamlined further with an EAM system, get in touch for a discussion or consultation.
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