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7/2/2003
12:03 PM
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If It's Broke, Fix It

Managing warranties for complex products is increasingly complicated as supply chains stretch out

Managing the warranty process for cars, factory equipment, and other intricate products is complex, and with increasingly extended supply chains and new government regulations, it's only going to become more so. At the same time, those who get a handle on the situation can reap significant savings.

There's a lot to sort out. Is the original equipment manufacturer directly responsible for making good on a claim--or does that job fall to a contractor who did some subassembly work, a supplier of one of the parts in the product, or even an insurance agency? What about the difficulties involved in getting timely and accurate failure data from the field, which could help pinpoint problems to a specific audience and avoid multibillion-dollar recalls?

And if you happen to be in the automotive business, you're accountable to the National Highway Traffic Safety Administration, too, thanks to the Transportation Recall, Enhancement, Accountability, and Documentation Act. The legislation requires automakers to report safety-related information such as warranty claims.

Vendors are stepping up their interest in this area, says Kevin Prouty, industry analyst with Gartner G2, a subsidiary of Gartner. One such company is Entigo Corp., which next week will roll out version 4.0 of Entigo Warranty. The software builds on the company's original vision of automating and regulating claims-processing workflow with features to enable collaboration at multiple levels, both inside and outside the original equipment manufacturer. Entigo also partners with IBM and SAS Institute Inc. to let companies analyze structured data, such as claim statistics, and unstructured data, such as handwritten technician reports, to help detect problems early and target warranty fixes.

Among the other vendors offering warranty tools is SAP, whose claims-processing software for the automotive industry automates the task and gathers warranty information into a single repository. ServiceBench Inc. has a Web-based application that can be used to build a hub for manufacturers, parts distributors, extended warranty providers, retailers, and service providers.

Content integration may be one of the biggest challenges companies face when implementing warranty-management software. Companies should structure their content so it can be associated with the appropriate customers, says Marc McCluskey, service director at AMR Research. That way, with the customer as the starting point, the company can efficiently trace the warranty information backwards through the supply chain.

No one product does everything customers need, yet. "Everyone thinks they have control of the most important part. Product life-cycle management software has all the engineering information, and ERP has all the business information," Prouty says. Entigo may come the closest, thanks in part to its partnership with IBM and SAS, he says.

Improved warranty management isn't a new idea, but many companies have a lot to learn about it. Some companies' warranty costs are as high as 15% of annual sales; others are as low as 0.3%, says Entigo CEO Steve Layne. Part of the problem may lie with using legacy warranty systems that aren't easy to modify to meet new requirements.

Entigo 4.0 is Web-enabled, with a rules engine that business staff can modify, reducing claims, systems operations, and labor costs, the company says. New features include built-in workflow support, business rules for semantic data validation and automated claims processing, and integrated J2EE-enabled business-rules support from Ilog Inc. Pricing is based in part on the size of the organization; it typically ranges from $500,000 to $800,000.

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