Entry: Best Project Achievement in Business Enabling Processes Enterprise Warranty Risk Reduction Process
Strategic Objectives and Scope
Delphi is a Fortune 500 company that supplies automotive components to the global Automotive and Truck Original Equipment Manufacturer (OEM) markets. Delphi Powertrain (PT) is the largest of five Divisions within Delphi, headquartered in Luxembourg, Europe. Delphi PT’s 2007 sales revenue was $5.7B split between three Product Business Units (PBU’s). Like all automotive suppliers, PT is facing increasing pressure from the vehicle OEM community to improve product quality and assume a larger share of the warranty risk associated with their products.
This is an issue all industries face, but as Chart #1 illustrates, the automotive industry currently makes up the majority (54%) of the $70B spent annually.
Supplier risk factors include:
• Vehicle OEM’s aggressively pushing down warranty cost to the supply chain
• Vehicle OEM’s offering extended warranties as a sales strategy. Most OEM contracts require supplier support of these extensions with no re-pricing opportunity
• Recent Government consumer protection legislation has increased the risk of product campaigns, recalls, and consumer warranty events
• Vehicle/ System integration complexity is stressing the supplier’s test and validation capabilities
Chart # 1: 2006 Worldwide Warranty Spending – Source: “Warranty Week” Magazine
In mid 2005, Delphi PT executive leadership recognized the significant impact associated with warranty claims, and challenged the organization to develop a formal process for identifying and quantifying the warranty risk associated with all projects during the development and production phases.
The objective was to create an environment of “no surprises” from project launch to end of product life. The mandate was to develop a method to quantify and mitigate the warranty risk, identify all key warranty critical cross functional gaps, and clearly define ownership for each activity. Expected benefits would include:
• Improved Customer Satisfaction
• Reduced warranty impact
• Improved organizational awareness of warranty risk
• More effective utilization of project resources
Based on the need to assess the impact of the new process, the PT Executive Staff established the following organizational goals:
• Provide a quantitative risk metric and well developed mitigation strategy by 01Jan08
• Launch all new products with improved warranty performance vs. their predecessors(s)
• Ensure that all new products are launched with zero “special cause” field events
• Increase all functions understanding of warranty liability drivers and their role in reducing risk
These exclusive Award-Winning Case Studies, representing the very best uses of Operational Excellence practise are taken from The Global Six Sigma Awards. The Awards took place in conjunction with the Global Lean Six Sigma and Business Improvement Summit, and quickly became the industry’s most prestigious program. The Business Transformation & Operational Excellence World Summit has since taken over the Awards - to learn more, and see if your organization is suitable to attend, please visit the official Business Transformation & Operational Excellence Awards website.