Warranty work can save major repair costs for fleets. But when it’s brought in house, the savings can really add up. While dollar is king, there are a number of other benefits to warranty work — and a few drawbacks, too.
So what are the pros and cons fleet managers should know about when considering their own warranty program? Two fleets and a software expert share their experiences and reveal the true picture of warranty work.
➜ Warranty Revenue
When fleets bring warranty work in house, they garner greater control over monitoring what work is covered under warranty and what work they pay for on their own. In doing so, they can recoup many costs that may have been lost had they not been proactive about identifying potential warranty work.
The warranty program at the City of Mesa, Ariz., led by Pete Scarafiotti, MEng, CAFM, CEM, CPFP, director and automotive engineer, Fleet Services Department, demonstrates the kind of major cost savings fleets can see with an aggressive warranty program. With more than 2,000 units, the City’s warranty work for manufacturers such as Ford, GM, Peterbilt, and Wayne Engineering has made a major impact: Last year alone, it recovered $550,000 in potential lost warranty revenue.
➜ Decreased Transportation Costs
Warranty work can yield savings even beyond recouped warranty revenue. Costs can also be saved by eliminating transportation of vehicles to repair shops. When work is done in-house, this expense is no longer an issue, which provides an automatic boost to fleet budgets. Ultimately, this cost savings gets passed on to fleet customers — and to taxpayers.
The warranty program at King County, Wash., has seen first-hand the savings potential of reduced transportation costs. Currently, the fleet performs in-house warranty work on Ford, General Motors, Chrysler light-duty vehicles, and many heavy equipment makes such as Roush CleanTech liquid propane fuel systems, Case, Caterpillar, John Deere, Freightliner, Kenworth, and Columbia Body.
With 2,600 diverse fleet vehicles and equipment supporting the County’s services, gaining back time spent transporting vehicles has been a major help.
“Fleet recovers for repairs that may have been completed to just get the vehicle back in service,” said Jennifer Lindwall, director, Fleet Administration Division, King County. “But we were also able to minimize the cost of transporting vehicles to the dealer by doing the work in house, too.”
➜ Decreased Downtime
While eliminating transportation to repair shops saves costs, it decreases downtime, too. When every day on the road counts for fleet customers, eliminating travel time adds up, and customers will see the value.
Likewise, with control over when the work is scheduled to be performed, fleets can also reduce the timeline for repair, again reducing downtime.
And when the right software is used to manage the warranty program, downtime sees yet another reduction. “Software can provide fleet users the ability to identify potential warranty repairs early in the workflow process,” said Mike Brawley, vice president and asset product manager, FASTER Asset Solutions. “Early identification helps them reduce unnecessary downtime and rework. When managed correctly with a best-of-breed fleet management information system [FMIS], vehicle downtime can be reduced and a quantifiable cost savings is passed on to the taxpayers.”
➜ Increased Customer Satisfaction
“We have an aggressive warranty program and have a dedicated employee who captures all potential warranty and files claims with the vendors,” Scarafiotti said. “There is a lot of money out there that fleets are not fighting for; if you don’t, your customers and taxpayers are not getting the service they deserve.”Reduced downtime certainly improves customer satisfaction, but in-house warranty work can also improve their satisfaction with the bottom line.
➜ Demonstrating Your Value
Brawley notes increased customer satisfaction can be reciprocated to fleets by increasing the value of fleet services in the eyes of customers. “Another benefit is the recognition from customers that fleet is providing high-quality service and is competitive to the private sector,” he said.
When fleet customers see the dedication to saving costs and getting their vehicles back to them faster, the importance of fleet services and their commitment to quality service are legitimized.
“We decided to bring warranty work in house for the cost savings, but also to prove to our customers our worth as their business partner,” Scarafiotti said. “Initially, most of them were surprised that we might be able to give them money. Now we produce a weekly online report for customers so they can track the status of open warranty claims and see the magnitude of their cost avoidance and their weekly revenue.”
➜ Highly Trained, More Productive Technicians
When fleets are approved to perform warranty work, they gain access to the most current training and diagnostic equipment, which in turn means technicians are more capable.
Likewise, the more work being performed in house, the higher the productivity of technicians. And, because transportation to the shop isn’t a factor, technicians spend their time working, not ferrying vehicles to the dealership, Lindwall said.
➜ Better Manufacturer Relationships
While hard dollars may be difficult to associate with it, another major benefit of in-house warranty work is the improved working relationships fleets see with manufacturers. As these relationships grow stronger, fleets may get better service from manufacturers.
“As warranty providers, in some cases certain manufacturers might provide higher levels of service to the warranty shop in regards to preferential parts availability and pricing,” Brawley said.
➜ The Set-Up
While a well-oiled warranty program can easily yield cost savings, there is always a large measure of work associated with great results. For warranty work, much of that work comes with the set-up.
“Initially meeting with the many manufacturers and setting up the contracts was somewhat time-consuming,” Lindwall said. “Technician training and purchasing the necessary equipment to perform the work was another major task.”
However, with careful planning, a warranty program can become a reality. Even so, fleets should be prepared to devote a great deal of time to the set-up, and of course the ongoing time required to keep the program running, too. (See sidebar, “Tips for Starting Your Own Warranty Program” on page 26.)
➜ Keeping Software Current
Lindwall said another challenge is keeping diagnostic software current for multiple manufacturers. However, OEMs can help, so the better your relationship, the easier to stay up-to-date.
➜ Vendor Pushback
Warranty programs would be a breeze if every claim were paid unconditionally. But manufacturers must watch out for their business, too, so expect some debate when it comes to claims.
“Vendors push back,” Scarafiotti said. “There’s no money in it for them, so they will fight hard to save every penny.”
➜ Record Keeping Is Essential
When vendors debate claims, meticulous record keeping must become a reality.
“Record keeping is everything — it’s the only proof that you have,” Scarafiotti warned. “Keep photos and video of problems so they can be discussed, especially if you have to elevate the problem. Likewise, keep the old parts if the agreement specifies such; e-mail the vendor for written instructions before disposing anything. A paper trail helps.”
With a 92% success ratio (claims to financial satisfaction), Scarafiotti’s documentation has paid off.
“As we became more successful, the word got around to the vendor community that we were very good at documenting warranty claims,” Scarafiotti said. “Now it’s much easier to win since they expect us to debate all and have the backup to get what we want.”
➜ Keeping Qualifications Up to Par
According to Brawley, another challenge is meeting and maintaining the qualifications and criteria required by the manufacturers to be a warranty provider. “Each program needs to be administered and often a fleet is a warranty provider for several manufacturers, which can add to overhead,” he said. “Without a best-of-breed FMIS, it is difficult to justify this new position, although a quality warranty program can pay for any necessary positions, as well as provide good return on investment (ROI) for implementing a strong FMIS.”
In the End, Benefits for All
While warranty programs may present challenges, in the end everyone can benefit from them.
“A well-run in-house warranty program can benefit all: The customers get their vehicles back quicker for less downtime, the technicians get the most up-to-date training and diagnostic equipment, the fleet recovers for repairs that may have been completed to just get the vehicle back in service, and the manufacturer gets a satisfied customer to promote its products,” Lindwall said.
Maximize Your Warranty Program
Already have a program in place? Pete Scarafiotti, MEng, CAFM,CEM, CPFP, director and automotive engineer, Fleet Services Department, City of Mesa, Ariz., suggests these tips for taking it to the next level:
- Establish a yearly warranty recovery goal.
- Ensure all vendors understand warranty recovery is important to your city, county, or state.
- Bid documents should state the required labor recovery rate in all new equipment contracts.
- Post award, the fleet should meet with the successful bidder to establish the warranty submittal protocol.
- If a vehicle must actually go to the vendor, the fleet should use a driving service so valuable technicians are not removed from other work.
- A program should be instituted for each vendor to track submittal dates, repair details, cost recovery, etc.
- Opt for cash reimbursement, but consider accepting parts in lieu of cash on occasion.
- Work with accounting to set up customers to receive the cash reimbursements passed from the fleet to the customer’s programs.
Tips for Starting Your Own Warranty Program
Wondering whether you should start your own warranty program? Mike Brawley, vice president and asset product manager, FASTER Asset Solutions, offers this tip: “Analyze the number and types of repetitive repairs you are currently doing as well as the amount of warranty work that is currently being performed by your outside vendors. This analysis should cover several years, because warranty work can be cyclical in regards to the age of the fleet and the fleet type makeup. If that amount is significant, consider becoming an in-house provider.”
Jennifer Lindwall, director, Fleet Administration Division, King County Department of Transportation, Wash., and Pete Scarafiotti, MEng, CAFM, CEM, CPFP, director and automotive engineer, Fleet Services Department, City of Mesa, Ariz., offer the following tips for getting started:
- First, get executive management to recognize the potential of the program.
- Discuss recovery potential with customers so they see the value, too.
- Include vendors on your team — invite them in and explain what you want to do.
- Work with OEMs to get the most current vehicle information to technicians and the most updated diagnostic equipment and software.
- Hire an experienced administrator to manage the program and process claims to get the highest reimbursement.
- Help technicians become comfortable with the necessary manufacturers’ processes to make a warranty claim.
- Give technicians time to complete training.
- Set up the accounting to receive payment.
- Set realistic first-year goals.
Software — The Shortcut to a Streamlined Warranty Program
Software is integral to managing warranty work. To streamline a warranty program, Mike Brawley, VP and asset product manager, FASTER Asset Solutions, advises fleets to look for a fleet system that can provide all of the following:
- Associate the manufacturers’ actual warranty coverage(s) with the repairs being performed.
- Alert the maintenance staff to which items are covered under warranty, which is important to providing the data needed to differentiate warranty maintenance costs from everyday repairs costs.
- Identify warranty repairs early in the process, which helps fleets schedule resources accordingly so vehicles and equipment are placed back in service as soon as possible.
- Identify repair trends so that recurring repairs that have not have been considered a warranty item previously can be reclassified and covered under the warranty.
- Help manage the claims process, or the reimbursement of costs once the repairs are complete.