Autobeat Daily September 17, 2003
OEMs say they want suppliers
to shoulder more responsibility—and costs—associated with warranty claims
involving the components they make. But how should those factors be determined
and allocated?
John Henke Jr., president of
Planning Perspectives Inc. in Birmingham, Mich., produces an annual analysis of
the OEM-supplier relationship, The Nor th American
Automotive OEM Benchmark Survey. He suggests the issue is murky because
OEMs have not yet developed specific processes to help them make those
decisions.
Have OEMs spelled out
what they expect from suppliers on warranty costs?
Suppliers are getting mixed
signals about what’s going on.Publicly, the North
American OEMs say they are going to suppliers to ask for monies to help cover
warranties. But suppliers say there seems to be no process to determine
responsibility. Suppliers say there’s some pressure but not great pressure.
How are warranty
responsibility issues being addressed today?
None of the OEMs appears to
have a good process of determining who is responsible. It’s often a question of
who can argue the loudest and longest. In some cases, a supplier argues back,
and that’s the end of it. In other cases, it can go on and on. Suppliers say
there is no definite pattern about how rigorously the OEMs pursue warranty
responsibility issues.
Will the question of warranty
cost respon-sibility go away?
Oh no. There’s enough buzz
about it that suppliers are concerned, but they don’t sense a feeling of
urgency or know what they should be doing. Suppliers are trying to design the
highest quality they can for the price they’re being paid. If OEMs want parts
that last longer, are they prepared to pay for them? That doesn’t seem to be the
case for many companies today.
How difficult is it to
specify warranty costs?
OEMs have a difficult time
determining warranty costs for a specific par t because they don’t
always have good records. It’s understandable. Look at how many parts there are
in a car. A comprehensive database would be huge. Then there’s the law of
unintended consequences.
Maybe you’re the world’s
greatest brake manufacturer, but your product doesn’t function well because of
a problem with some related component. Is that your fault? Is it the fault of
the other component producer? Putting a system in place to allocate
responsibility for all those parts will be one of the most difficult challenges
confronting the OEM-supplier interface.
How do dealers figure
into the equation?
They play an obviously
critical role. Are they indicating warranty concerns properly? Have
parts genuinely incurred a warranty situation? What about a good
mechanic who can see that a part hasn’t failed but is about to do so and replaces
it before the customer has a problem?
What must OEMs do to
address warranty costs more effectively?
When domestic OEMs move to a
total cost perspective, warranty costs will become a major issue.
They’re not even close now. Buyers at the OEMs are measured by reduction in
piece price, not total cost reduction. Until buyer performance is measured
on the basis of total cost to the corporation, they won’t focus on
bringing warranty costs into the equation. It may be the right thing to
do, but they’re not being measured that way today.
For more about Planning
Perspectives Inc. research on the OEM-supplier interface, call (248) 644-7690.