CIMdata PLM Industry Summary Online Archive
18 October 2004
Product News
IBM to Help Automotive Industry Address Warranty Pain Through New Business Initiatives
IBM announced that it is launching a comprehensive set of services to assist the automotive industry in corralling excessive warranty costs. This business move comes in response to the dramatic impact warranty has in a market with intense margin pressures and more than $14 billion in annual auto-related warranty exposure within the U.S. alone.
Worldwide, IBM will offer automotive manufacturers and supplier's new ways to view, analyze and collaborate throughout the extended enterprise on all aspects of warranty management. IBM has expanded its Component Business Modeling (CBM) services to address specific warranty pain points that include warranty claims submission, processing and settlement; analytics, extended enterprise collaboration, regulatory reporting and compliance and enterprise systems integration.
Despite U.S. average vehicle warranty costs of about $700, manufacturers are continuing to broaden warranty coverage to remain competitive in vehicle value perception and sales. At the same time, increasing complexity from in-vehicle software and electronics is creating more opportunity for failure. It is also making problem determination and root cause analysis increasingly difficult. The quality challenge is compounded by the complexity of vehicles, which today have an average of 14,000 parts, as well as by shrinking design and product-introduction cycles.
IBM has used CBM services with clients in a number of industries, and IBM has developed a specific model for warranty. CBM is an IBM analytical toolset that helps companies make better decisions by spotting overlapping, dependent activities and the resources used to support those activities. By grouping "like" activities-or business components-without regard to organizational, geographic or process boundaries, CBM facilitates analysis from multiple perspectives, and the intersection of those views offers improved insights for decision-making. As a result, companies can focus on enhancing their strategic, financial and transformational priorities to optimize efficiency and accuracy of claims processing, shorten problem root-cause identification and resolution and thereby reduce overall warranty costs.
IBM clients have been able to identify business improvement opportunities using tools like CBM, with savings totaling in the millions of dollars.
IBM's announcement is the outcome of our extensive research on issues related to warranty expense," said Linda Ban, Global Industrial Leader for IBM's Institute of Business Value. "In a recent IBM study entitled Component business modeling, a new lens for examining warranty administration, we have shown that warranty-claim resolution typically takes more than 160 days. Eliminating just five days from the warranty-claim resolution cycle can save the industry more $164M. CBM greatly enhances this process. Moreover, faster resolution results in the improved quality of products and processes, fewer claims and lower overall warranty costs-with cycle-time improvement representing a major financial opportunity."
Specifically, IBM's CBM solution equips OEMs and suppliers to:
• Collaborate and share data with necessary data privacy to administer claims effectively and pinpoint the root cause of the problems.
• Collaborate in real time among multiple teams with benefits including portal capability, intellectual capital reuse and workflow management of coordinated tasks.
• Trace vehicle parts back through their entire life cycles, from supplier design to end-of-life disposal.
• Track high-warranty cost parts, with the capability of using innovative solutions like RFID.
• Recognize problems earlier and issue warnings service, quality and engineering groups within OEMs and suppliers.
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