Best Tool for Warranty Cost Reduction 3

[Saar]

Dear all,

I got a new job. My one and only responsibility right now is to reduce the warranty cost and finding the root cause. Last year the warranty cost went up from 1.5% to 3%, they r losing $5M every year. SO my question here is what tool would be appropriate to analyze the problem. Also what kind of data i need to collect?. Our product is Oven (for Mcdonald's speedway and few others...). Right now i have collected datas like warranty cost of each month and YTD, Sales YTD, No of Reports, Top 25 faliure parts and so on. what else i need to collect. They gave me 2 months time for the initial report. Any help would be appreciated.

 

[BillPSU]

Review the company's warranty policy and determine if the claims are truly warranty or someone making an upset customer happy. Some claims will probably be caused by customer misuse of some variety and should have not been warrantied in the first place. This will divide the claims into true warranty and sales initiatives. Examples of customer problems would be incorrect installation (single phasing motors,wrong voltage) or misuse such as a foreign object causing a failure or shipping damage.

Next divide the true warranty claims into design or component failures and workmanship failures. Workmanship issues must be dealt with at the manufacturing facility. Design issues must be corrected with engineering analysis. Component failures usually fall into either a defective component was used and the warranty costs should be redirected to the supplier of the defective component or the other case the component used was inadequate for the application and failed. The inadequate component is then a design issue, redesign using an adequate component. This component issue may even be purchasing related as a less expensive component was utilized which was decided by "somebody " in purchasing/management position.

Quality must become the number one goal for everybody supplying everything from the design and parts through manufacturing and use.

 

[MikeHalloran]

You've probably done all that could be expected already with analysis of data generated by others.

Of course that data may contain substantial errors, outright falsifications, and 'herd mentality' rumors disguised as fact, and you would have no way to know, unless ...

you, personally, examined, tested, disassembled, reassembled, and salvaged or blew up, a statistically significant number of allegedly failed units.

Do not be surprised if it is much more difficult to get your hands on actual returned hardware than on paperwork alleging that it exists.



Mike Halloran
Pembroke Pines, FL, USA

 

[Saar]

Thanks for the quick reply. I have already breakdown the cost into different catagories. Like Billpsu said, i have seperated the cost of workmanship and warranty claim. The problem is we have a seperate agency which will take care of the service and send the bill to us. If the bill exceeds certain amount we will ask them to return the defective part. Since i am new i didnt really get into the design and testing procedures. ALso my company always believe in datas. Whatever i am suggesting should be backed up by the data i collected.

 

[griffengm]

Saar,
If available, include date of manufacture and location of manufacture if more than one.
Make it a point to talk with whoever inspects the returned items. Sometimes important information never gets recorded. Ask the inspector also about the condition of the packaging when the items are returned. We found that sometimes damage is post-failure but can masquarade as causal.
Five mil$ justifies a lot of communication quickly.

Griffy

 

[MikeHalloran]

Without putting too sharp a point on it, so far you, personally, have collected _zero_ data. You have manipulated and completely trusted someone else's data. When money is involved, "Trust everyone, but ... cut the cards."

Now, I'm not saying that anyone is being dishonest, but the situation you describe is pretty much guaranteed to produce some, uh, marginal behavior. To get a clue about that, you might start analyzing the distribution of failures by dollar value. If, for example, the threshold for returning a dead part to you is, say, $500, and you get billed for a lot of $497 failures, you should become suspicious. There are probably other tests that would occur to a Forensic Accountant. You might wish to engage one just for fun, while you find a way to do some actual engineering.

To that end, you might request that the service vendor ship a week's worth of failed junk to a location of your choice for personal examination by you, and by the people who designed it and still think it's working just fine.



Mike Halloran
Pembroke Pines, FL, USA

 

[CompositeGeek]

I had a similar project where all of my data came from other sources that were good and bad. I found I could cross check internal data against external data for accuracy, timing, etc of events with some degree of success by asking my customer for their maintenance action records. We focused on spare parts buying due to maintenance checks and catastrophic failures (read warranty claims) to link events at the customer to an activity in house. This eliminated a number of false positives in my case, which btw was sewage collection holding and treatment systems used on cruise ships where our firm represented the yard that installed the equipment. Like you we had a high rate of warranty claims and little corroborating data for the events reported. It was clunky and much of the data had to be processed by hand. Once that analysis eliminated false positives (the customer thought it was a warranty action but it really wasn't) a new and much more informative pattern emerged which allowed us to focus on the issues with the greatest impact to reliability which we fixed by simply changing the periodicity of the maintenance activities. Cost dropped substantially. BTW this project took over a year not two months.

Good Luck!

Composites and Airplanes - what was I thinking?

There are gremlins in the autoclave!

 

[MedicineEng]

I don't want to look like a "conspiracy theory" guy, but 5M$ is a big pie...
You refer that you have the warranty claim handling subcontracted to a company that then bills you. How is that contract? Is this a lump sum that you pay upfront that covers the warranty or you pay each time that they actually have to go to client's site and fix the equipment?
It seemed to me that it was the later one. So, they in fact earn more if your product fails more, isn't it? Even if they don't do it on purpose is a strange thing going on here: you want that the warranty is not claimed by your clients, but the company that performs the claim earns more if your clients claim. Do you see it?
What is the "penalty" to the warranty provider company if one clients claims several times on the same issue?
I would start by there, by seeing if everyone is interested in reducing the warranty claims or not...
I finish with one story that I was told long time ago:
There was a doctor in a small town that had a patient for 20 years that was always complaining that he couldn't hear from his right hear. He was going to the doctor, he would disinfect the hear and "come next week to see if it improved" and like that 20 years passed by. Then, the doctor retired and passed the practice to his son, that meanwhile also got MD. The patient "inherited" from his father came to see him with the same old complaint. Right in the first appointment, the young doctor detected a bean inside the hear of the now old man. He took it off and the man was completely relieved and happy because he could hear again. Later that night, the son asked the father: "Father, you remember Mr. Smith, your patient with the hearing loss complaint for already 20 years? I discovered a bean in his hear and it seemed that this was the cause. I've removed it and now he is healed". The father just said:"My son, this bean paid your MD. Now you have to find another bean to pay your sons' college ..."
Sorry for the long post. Keep us informed about the development on this issue.

 

[Saar]

Sorry for the late in reply. Went for a travel to all customer sites.

MedicineEng... I completely agree with u. You pictured the exact situation happening here right now. You are right, we have a service agency which will perform the repair and send the claim to us. After analysis of each report my initial thought is they are screwing us royally. We get lot of claims for the same isuues and we r paying to them again and again. No question asked. The service related cost of most of the oven have exceeded the cost to built a unit. The problem is the man power in QA is limited. So everytime we process the return of defective component from the agency in most cases the component is not defective at all. There are two main reasons. Lack of knowledge and the one you said about keeping their business running. Because of the lack of man power we couldnt check all the returns. So we will pay their claim without the approval from QA. The main problem with oven are the digital control board and heating element. The control board is very reliable usually the software will screw up and u need to reset the controllers. Though the instructions are provided to all agency on how to reset them most of agencies just replace them with new board. Each service of control board itself cost $600-$800.

My main focus now is on our service agency and i have created the following actions plan for future claims

Hiring a quality technician to focus only on the returns and also the incoming quality inspection. His primary job is to check todays return and give report the following day. Based on that we will now either pay or decline the claim.

Creating a simple but good enough test plan to test all returns of critical components

We are charging only the material cost to our supplier incase of failure both in line and field. Now onwards the total warranty cost (servical call cost,labor cost, miscellaneous cost) will be included in supplier chargeback. To be simple just updating our returns and chargeback policy of suppliers.

Since this is a food market most of the people mindset is to get the product in tot the market ASAP. So the testing will be performed for the product. From now onwards for all future new product an accelerated life testing will be done for all critical components.

Evaluate all service report for correlation and evaluate all service agency based on the claim and the issues like how many times they did the service for same issues, Analyzing the part send fby them and so on........

Lets see how things goes...... If you guys feel any actions need to be included kindly post your response.

 

[MikeHalloran]

.... reset the controllers?

There is no reason on God's Green Earth why an embedded computer should need to be manually reset, ever.

Same for desktops ... < long boring rant about Billy omitted >.

If they're your controllers, you should be, um, hiring. If they're someone else's, you should be screaming, and billing them for your warranty costs.



Mike Halloran
Pembroke Pines, FL, USA