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The Weary World of Warranties

16 Dec, 2003 By: Ronelle Ingram imageSource

The Weary World of Warranties

dealerships continue to struggle with manufacturers about part warranty issues.
Warranty return leniency and warranty return impossibility seem to fluctuate
like a slow moving pendulum. Through the years, I have seen both dealers and
manufacturers take advantage of written and implied warranty procedures.
Eventually dealers and manufacturers seem to break under the abuses of both
sides. The pendulum then swings back the other direction.

today's marketplace, the pendulum seems to be swinging in the manufacturer's
favor. Warranty returns are more cumbersome than ever. Proof of purchase; proof
of installation; proof of failure; proof of meter count; limited return time;
preauthorization requirements for returned parts; Internet return forms that
continually default to error messages; and defrag commands are part of the
service department's daily grind to receive warranty credits.


Service managers constantly wrestle with figuring out the cost of the service
technician's or other employee's labor to research and fill out the needed
forms; wait to receive and track a manufacturer's issued return authorization
number; ship the warranty part back to the manufacturer; reorder and pay for the
freight and cost of the replacement; and track the eventual credit being applied
to the dealers account. The normal process can take 90 days from equipment
breakdown to properly applied credit.

is an increasing cost of warranty return to the dealer. Many profit savvy
service managers have come to the realization that only the most costly of parts
are worth attempting to return. By the time labor, Internet, freight, tracking,
follow-up, and frustration are factored in, a minimum of $150 in potential
return is necessary before they will even bother to deal with a warranty return.

more old school, principle-driven service managers feel it is imperative that
all warranty parts are returned for credit. "How else will the manufacturer
know there is an inherent weakness in the equipment?" these service
managers say. "If no one ever returns a defective part, shoddy
manufacturing techniques and products will continue to be used in the equipment
we sell. Dealers have more of an intimate knowledge of the peculiarities of
products that go into each product."

length of warranty is another issue to be considered. Each product has its own
rules and regulations with terms including 90-120 days from invoice, 90 days
from install, one year, three years, prorated, full refund, and exchange only.
And, while manufacturer's warranty return literature used to be one page,
dealers now have notebooks with well worn divider tabs. Each section holding
multiple pages of rules, corrections, policy changes, new requirements, and
additional frustrations.

increased reliability of digital equipment is a double edged sword. Fewer parts
are being replaced but, the parts that need replacing are much more expensive.
Most manufacturers have gone to the simple replacement of assemblies in the
digital products. The needed gear or sensor requires the replacement of an
entire assembly costing hundreds of dollars. The freight charges, warehousing
cost and space required in a tech's on-hand stock for an assembly is much
greater than before.

In my
dealership, we will no longer honor the manufacturer's warranty on products that
our dealership did not originally sell. The warranty labor rate being offered
for reimbursement is 33 percent of my dealership's rate. The parts warranty is
so tedious, with no reimbursement for two-way freight costs, that I can not
afford to honor the manufacturer's warranty on potential new customers who have
recently moved into our servicing area or are dissatisfied with their current

manufacturer's offer end user telephone hotline numbers to return defective
supplies, customer installed drum units and PM kits. These toll free numbers
often result in long-term hold time for the end user. In many cases the customer
refuses to be on interminable hold or transferred from customer service rep to
customer service rep in the hopes of qualifying for a warranty product
replacement. Ultimately, the customer calls the dealer who sold a sealed
manufacturer's product for a refund. The dealer usually winds of providing a
free warranty product and takes the entire financial loss. The dealer requests
the customer throw away the defective part rather than pay for the return
freight cost. The dealer rationalizes it is part of the cost of doing business.

manufacturers have separate warranty rules for their retail sales branches and
their privately owned dealerships. The branches receive a set percentage of cost
for all parts and/or supplies purchased as an instant warranty credit. The
dealers must provide proof of failure and are reimbursed on a piece by piece
manner. As manufacturers have merged, however, there is a blurring of the new
warranty policies.


In Point One major manufacturer has recently established a new warranty policy
as of October 1, 2003. A three page, well written memo from the manufacturer
described the new parts and supplies warranty program. According to the memo,
there would be no more paperwork and the dealer would be able to enjoy instant
benefits from the program with direct credits applied immediately to every parts
purchase and no storage space needed for holding parts that need to be returned.
So far it sounds great.

memo went on to explain that the manufacturer had ascertained that 1.04 percent
of a part's purchase price would appropriately compensate the dealer community
for all defective parts and supplies. Yes, the percentage is only on the parts,
but it covers parts and supplies. Dealer service managers, who have personally
contacted me, have expressed concern for the small amount of the instant parts
credit being offered. Because most of the parts warranted are replacements from
the original equipment purchases, there is very little relationship between the
cost of parts being purchased and the cost of parts being warranted.

this was a very nice marketing piece, offering 1.04 percent credit would not
even begin to cover the amount of warranty products I'm returning. With the new
digital equipment using assemblies, large capacity toner units, high priced
laser units, and hard drives, my dealership has consistently been returning a
minimum of 12 percent per month to a maximum of 21 percent of parts warrantees
per month.

I have
found my manufacturer's warranty procedures to be extremely stringent and
time-consuming. There is no doubt that all of our returns are legitimate and
fall within the warranty guidelines. But, there is a huge difference between
1.04 percent and an average of a 15 percent of warranty credits my dealerships
is receiving on defective warranty parts return each month. The difference in
real dollars between 1.04 percent and our actual warranty return credits means
more than $50,000 of lost warranty this year.

secondary concern when a manufacturer sets a specific amount for warranty credit
is the service department's fear that shoddy parts may start being used. What
incentive does the manufacturer have to provide superior quality products when
the dealer will have to incur the cost of sub-par parts? Without a constant flow
of returned parts, the manufacturers will not be able to quickly ascertain when
a specific parts or assembly is suspect to premature failure. The only way to
identify unusually high breakage rates will be an increase in the number of
replacement parts being purchased.

doing research for this article, I contacted several manufacturers, identifying
myself as a columnist with imageSource Magazine doing research on manufacturer's
warranty policies and return procedures. NO ONE returned my calls. I felt as if
I was a 60 Minutes reporter being shunned by the bad guys.

and manufacturers must work together to provide the end user with equipment,
parts and supplies that have a proven history of quality. Each must be
respectful of the needs and cost restrictions of the other. As a working service
professional, I am increasingly concerned with the adversarial position that is
created between the dealer and manufacturer. Our dealership's time and energy is
better spent helping our customers than disagreeing with our business partners.

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