Caused by increasing customer demand, intensified competition through international markets, and an increasing bargaining power of the consolidating automotive industry, cooperations between automotive suppliers and OEMs have come under pressure.

Particularly in the course of processing guarantee and warranty cases, suppliers are clearly sitting at the shorter end of the lever and are thus forced to agree on various concessions. There are several reasons for accepting this negotiating position: Fear of losing follow-up orders, increasing standardization on the OEM side, high sunk costs (irreversible costs through research and development) but above all lacking transparency and insufficient communication

Especially small and medium-size suppliers with a relatively low bargaining power suffer from this development and consequently report about an increasing number of warranty claims and expenses, even though many warranty cases appear only though customer defaults. However, the burden of proof always lays with the producer/supplier. Due to lacking transparency and insufficient communication, this results in an almost hopeless situation since every responsibility falls to the suppliers, the stake holder with the lowest bargaining power. A representative survey among German suppliers has shown which problems had been crucial for this development:

• Lacking diagnostic data
• Insufficient cooperation and missing interfaces with OEMs
• Lack of resources on the part of the suppliers themselves

These problems identified in the course of the survey result in lacking transparency and insufficient communication between suppliers and OEMs and can be addressed by implementing professional Warranty Management Systems.

A Warranty Management System is an integrated platform for suppliers and OEMs which provides both parties with all relevant figures, KPI’s, analyses, trends, and reports. Although there are some few innovative and clear-sighted suppliers which use a Warranty Management System with integrated tools and customer interfaces, most suppliers are still exclusively orientated to the needs of the OEMs and are thus forced to work with several customer systems at the same time (Figure 2). Consequently, no process standardization is possible, transparency not achievable and the realization of experience effects on the part of the employees impossible.

Warranty Management describes the management process of warranty cases between suppliers, OEMs, and end customers. Frequently, this process comprises the claim, the assessment, the reporting, negotiations and if necessary the restitution of a defect part (in most cases on the basis of a technical factor).

Underestimated for a long time, clear-sighted CEOs and directors now recognize the increasing importance of Warranty Management for the entire organization. On average, European OEMs establish provisions of 2-6% of the company’s annual revenue - a comparatively high percentage share (Figure 1). Having in mind, the corresponding absolute numbers it becomes obvious which financial reserves could be set free through a reallocation of warranty deeds.

By standardizing warranty processes, overhead costs can be reduced significantly, process quality can be improved, and employees can be disburdened so that they can rather focus on value creating tasks. Moreover, Warranty Management Systems enable a more efficient provision and usage of information whereas both suppliers and OEMs are able to access any information at any given time. Accordingly, reworking costs can be reduced and waiting times eliminated to a large extent. Finally, Warranty Management Systems increase process transparency and thus lead to improved negotiating positions of suppliers. Warranty Management Systems facilitate the standardization of warranty processes, an improved communication between suppliers and OEMs and entirely enhanced process transparency.Warranty Management systems represent an integrated platform between suppliers and OEMs.