Warranty outsourcing will improve brand image, boost revenues, and raise customer satisfaction. "...We have always been a truck company....Today, we are a warranty company that happens to also build trucks."

Manufacturer's Extended Warranty Consulting:

For many manufacturers, the sale of extended warranties contributes heavily to net income. Whether they call them extended warranties, service contracts, or extended service plans, one things seems certain. Extended Warranty sales are no longer an add-on, but they are the difference between profit and loss in many companies.

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ACC Warranty Services Features and Benefits:

Reduced Internal Warranty Requests

Longer warranty periods, more complex policies, and a higher number of parts under warranty caused a rise of warranty claims and their associated costs. Using workflow and rules engines to automate the claims and registration process (thereby decreasing errors and time spent re-keying) and achieving consistency of claim resolution, ACC Warranty ultimately reduces labor costs. By identifying and rejecting invalid claims, the system decreases claims costs, and by delegating administrative tasks to channel partners the system reduces customer service costs.

Improved Supplier Cost Recovery

Although product quality continues to improve, warranty costs continue to grow along with charges due to faulty supplier parts. Improved communication and connectivity with suppliers is needed to manage supplier recovery, returns, and recalls. ACC speeds supplier cost recovery and ensures accurate reimbursements, often recouping costs mistakenly overlooked over in the past.

Increased Revenue Opportunities

An efficient warranty process opens the door for additional revenue opportunities through optional, extended and custom warranty programs. Warranty, which was previously viewed as a cost center, can become a positive revenue source with the help of ACC intelligent administration of warranty programs. High-margin products, such as extended and custom warranty offerings, can be sold not just at point-of-sale, but also at point-of-service and end-of-warranty.

Enhanced Customer and Channel Loyalty

Complex and incomplete warranty claims can cause normal processing to take months. The ACC system validates claims against applicable policies and dramatically reduces reimbursement time to just days. The workflow engine automates the claim processing paper flow and problem claims are returned to dealers or elevated to the appropriate manager. Channel partners use a web-interface to enter, update, or check the status of a claim and receive immediate feedback on whether a claim is approved. Prompt claims resolution strengthens relationships and increases loyalty with customers and partners.

Improved Product Quality

A defective part could simply be a one-time failure or may lead to an extensive product recall. Data monitoring and trend detection provides visibility into product quality issues, which accelerates both problem identification and resolution. ACC Warranty identifies patterns in product defects and helps companies implement cost effective campaigns and proactively address current problems while enabling future product improvement.

Reduced Risk and Increased Flexibility

Warranty applications built on legacy systems significantly increase the cost of operation and maintenance, and limit the flexibility to respond to customer and competitive issues. By removing reliance on outdated systems and utilizing standards based platforms, ACC Warranty reduces risk and creates a cost effective operating environment. Furthermore, Entigo's Professional Services Organization ensures complete flexibility and extensibility through integration with existing back office and reporting systems.

ACC Warranty enables businesses to increase bottom-line profits by cutting costs and implementing efficient processes. Within the first year of implementing the solution, businesses can realize a positive return on investment

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Recent Manufacturer Case Study: Automotive Powertrain Warranty

"GM says customers are placing a value of $2,000 on the longer powertrain warranties."

"Our dealers are able to transfer that perceived value to their bottom line in many cases."

Detroit Free Press __________________________________________________________

THE CHALLENGES:

1. Develop a strategic warranty vision.

2. Integrate new vehicle warranty and extended warranty sales.

3. Create dealer and customer warranty marketing strategies.

4. Define customer-centric processes in the sales department.

The company needed systems and processes to collect accurate and comprehensive warranty claim data in order to properly price and underwrite their policy. Accurate data was a critical element of the strategy because if they underestimated the future claim obligations, this new revenue stream could turn into a drag on the profits of their existing product lines. The company's dealers had diverse systems, some of which could not even process extended warranty sales. It was decided that they would also need to manage the processing for the dealers without an internal system.

One of the key strategies in the new warranty product plan was to increase the number of customers and policies without increasing staff. In order to achieve this, the plan called for dealers to enter the warranty information through a web-based interface and send them automatically to the provider's system, thus collecting the data without any internal intervention. ________________________________________________________________

THE WARRANTY:

The package contained two warranties: A 3yr/36k bumper-to-bumper factory warranty and a 5yr/100k mile extended powertrain warranty. A bumper-to-bumper warranty covers everything except those items that are subject to normal wear and tear such as wiper blades, filters, belts, and etc. The powertrain extended warranty refers to the engine, transmission, and drive axle.

THE OUTCOME:

The overall cost to the manufacturer was nearly identical to the amount that it was already reserving internally for a 3/36 limited warranty due to a quality initiative that has improved production quality.

Increasing the warranty coverage without impacting the vehicle price has improved value and has resulted in a much imprved gross profit margin for the manufacturer and their dealers.

Customer satisfaction surveys show an increase of over 10%.

New Vehicle sales and profit levels since the improved offering leave no doubt as to the importance of Warranty.

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The Auto and Transportation Industries are not alone in their reliance on warranty sales.

Circuit City says extended warranty net sales were $103.3 million, or 3.5% of domestic sales, in the quarter ended Nov. 30. 2006



During the eighteen months between Jan. 1, 2003 and June 30, 2004, for instance, extended warranty revenue represented between 95% and 617% of the net profits of Eastman Kodak Co.

In other words, throughout the period the money they were losing through the sale of office equipment and photographic supplies was more than made up by the amount they earned from the sale of extended warranties. During the first quarter of 2003, the company reported just $12 million in net income, and $74 million in extended warranty revenue, meaning that without the income from these contracts the company would have declared a net loss during the period.

The only time in recent history that Kodak made less from extended warranties than it reported in net income was during the second quarter of 2004, when it reported net income of $182 million and extended warranty revenue of $173 million over the first six months of the year. At all other times, extended warranty revenue outpaced net income by a significant margin.

It would not be inaccurate to call Eastman Kodak an insurance company that also sells cameras. Or to put it more accurately, Eastman Kodak sells cameras and office equipment at a loss in order to sell insurance policies for those products.

Dell is another great example. During the fiscal year ending Jan. 30, 2004, the company reported $3.544 billion in operating income (before taxes). It also reported the amortization of $912 million of extended warranties. In other words, of the $3.544 billion in operating income, $912 million or 26% came from extended warranties, and $2.632 billion or 74% came from the sale of systems, software, and other services.

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Source: Warranty Week from SEC documents