How Can OEMs Use IoT to Mitigate Warranty Claims?

Warranty management does not always make it to the list of top priorities for OEM management teams. Streamline the supply chain, optimize the manufacturing process, and build a sustainable order book. And then, if there is still time, energy, and drive left, go after issues like warranty claims. That is the usual order of business.

This reactive approach differentiates leading OEMs who are leveraging IoT to mitigate warranty claims from those who treat it like business as usual. Challenges like warranty claims have a multidimensional impact ranging from brand equity to lifetime profits for a product category.

But, it becomes a pressing issue only when the warranty claims rise at a statistically alarming rate. And the gap is widening:

  1. Companies at the lower end (20th percentile) of a survey conducted by IBM were paying over 2.5x more than the leaders (80th percentile) for warranty expenses as a percentage of revenue.
  2. For claims process expense as a percentage of revenue, companies at the lower end are paying over 3x more than their leading counterparts.
  3. The number of fraudulent claims as a percentage of total claims was 2x at the lower-end companies than the leaders in the category.

Choosing between the two sides would be a question that begs an obvious answer. However, the real question is – what successful OEMs are doing to leverage their warranty mitigation capabilities that other players are not? And the answer is leveraging technology such as IoT and predictive maintenance.

While we dissected the costs prevalent to suboptimal warranty management, that is looking at the problem backward. Theoretically, you can drive your warranty costs down if you manufacture perfect products and offer shorter warranties. But, there is a high probability that the latter will diminish your competitive edge and lower your brand’s appeal to your customers.

The Challenges of Value-Delivering IoT Solution Implementation

What you need is a functional, holistic, and systemic solution. Leveraging IoT and focusing on service quality optimization, customer experience enhancement, and warranty mitigation can be the routes to achieve this feat.

However, the process is not as easy as it seems. Most OEMs are dealing with a tiered problem:

  1. Disparate Data Sources: The devices, data aggregation platforms, and the teams working on after-sales servicing usually operate in silos. The value chain of devices, platforms, and teams becomes more challenging when third-party vendors are responsible for after-sales services. The lack of data sharing capabilities is the primary source of inefficiencies in the system.
  2. Data Utilization Capabilities: Once the data is collected and stored, the company must plan how to utilize the dataset to garner insights. This would largely depend on the context of the issue. But lack of evolved data practices results in underutilized IoT data, even after it is collected, filtered, and aggregated.
  3. Lack of Baseline Measurement: Both customer experience and service quality can be measured with designated KPIs. However, several OEMs do not incorporate a baseline measurement for these KPIs in the service quality or customer experience assessment lifecycle. This way, issues are flagged and raised only when they have escalated as per customer complaints or financial drags in the product category. A Field Service report showed that only 23% of its respondents for a survey were able to analyze field services with KPIs using the data collected from deployed devices.
  4. Legacy Infrastructure: While Industry 4.0 is on the rise, several manufacturing organizations still depend on legacy machines/equipment. Implementing an IoT solution at scale would require interoperability – which is available only for a selective set of IoT offerings. In addition, putting legacy infrastructure and modern IoT solutions in the same ecosystem poses integration and security challenges that most operations might not be interested in carrying. The reality is that such issues can be addressed if the IoT implementation partner can deliver the system leveraging legacy machines with the right IoT Gateways.

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Leveraging IoT for Better Service Quality, Customer Experience, and Warranty Management

Now that the map of challenges is clear, the question shifts to – how companies can work around this set of issues? An intelligent and well-connected IoT platform can solve most of these challenges. The right IoT platform will provide functionalities and benefits like:

  1. End-to-End Deployed Product Management
    Technicians, analysts, and authorized vendors will be able to discover the deployed products and even register the missed ones onto one federated platform. The platform will enable remote assessments and management of connected products.
  2. Compliance and Risk Management
    While the customers are usually well-intentioned, they might breach the usage threshold as directed in the product manual or established in the Service Level Agreement. With connected devices reporting real-time data, such threshold breaches can be recorded and used to mitigate faulty claims. The right IoT solution will enable this process by qualifying the warranty claims early in the workflow before the technicians and resources are assigned to the task.
  3. Proactive Servicing with Predictive Analytics
    Proactive maintenance can slash servicing costs by a considerable factor. As reported by Houston Dynamics quoting a Plant Engineering study, proactive maintenance can lead to 75% decreased downtime and 55% cost savings. Plan vanilla IoT platforms might have data aggregation and visualization capabilities. But, without contextual intelligence, they cannot leverage the data and predict downtime for proactive maintenance. The right IoT platforms are optimized for such functionalities.
  4. Service Quality Optimization and Product Assessments
    With the IoT solution at the center of the servicing and maintenance lifecycle, the entire process can be improved. After the service request is vetted and filtered, apt technical resources can be allocated for field duty with the necessary equipment. This reduces reverse logistics issues and costs redundancies associated with repeated visits for the same service query.
    Moreover, the assigned field service engineer can be equipped with asset issues and insights, custom product details, and other specifications necessary to deliver an effective field service. Once the repair & maintenance engagement is completed, the same IoT solution can provide access to service quality assessment. Whether it is the matching quality between the service request and the technician or the lead time to fix the issue – each factor can be assessed with granular details. This acts as both a diagnostic tool and a deployable solution for enhancing service quality without increasing the costs.
    The data streams reporting on service issues with certain product families can also show gaps in product quality assessments. Even fundamental trend analysis on which products have concentrated servicing costs can help the company optimize its suite of offerings.
  5. Growing Revenue Streams
    The most significant advantage for IoT solutions is the set of revenue opportunities. Such solutions have the capability to collect real-time data related to asset health, Operation, maintenance, and performance. OEMs can also use the IoT for product R&D, design enhancement, and performance improvement. Putting it all together, IoT can be leveraged for tailored solutions with varying degrees of asset management that maximize uptime and deliver value to customers.

Conclusion

The right IoT solution can have a ripple effect on an OEM’s warranty management ecosystem. For deploying the right sensors to aggregating the data, performing contextual analysis for predictive maintenance, and assessing end-to-end customer requests & service quality – IoT can make service quality optimization, warranty management, and connected customer experience more accessible for OEMs.

Thinking of leveraging IoT in your warranty management?

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