Four steps to prevent warranty claims in your business

by Mike Turner

In recent months we have seen several companies featured in the news because of product failures in the market place. This is often followed by reporting of poor financial results and/or tumbling share prices.  Sometimes it is exacerbated by the company having to set aside large sums to cover legal claims concerned with their products.

Warranty claims are a nightmare for many companies, the more so with social media highlighting and accelerating consumer knowledge, concerns and action over corporate failures.

How can reputable companies end up with faulty products? What are the questions that chief executives and chief finance officers should ask that drive minimum risks and resultant claims?

How do faulty products happen?

When working with large complex businesses in particular, we find that product faults tend to happen for two reasons in the main:-

  1. Pressure to get new products to market before full testing has taken place or before enough data has been collected from the tests
  2. In the thrust for globalisation, companies are entering new markets or setting up new production facilities and processes before product and process specifications have been fully checked in new environments.

So how can businesses minimise these risks?  I believe there are four key areas to focus on.

1.Test products holistically

A classic issue is that risks are identified on individual components, and performance tests and specifications are worked out on these individual parts – but not the same focus is given to the risks of the product as a whole.

A typical example is where a change is introduced, such as a new supplier in a new country for production or a new material specification – typically to drive costs down.  The question that needs to be asked is “how do these changes affect the total product performance?”

The best way to manage this is to bring all the parties together to look at the whole design, development, manufacture and supply chain and identify risks ‘in the whole’ at the beginning.  We find that identifying the risks and recording them from the start is not widespread practice and yet is critical in managing later stages of new product introduction.  Agreeing what factors are driving reliability, and which tolerances will put the product at risk is vital.

2. Improve risk assessment processes

I mentioned above the challenges of getting new products to market quickly.  The issue for field reliability is that you have to assess risks on unquantified liabilities – because the product is new, there is not enough data to be confident about reliability.

This pressure on speed to market is only going to increase, so the challenge for companies in these environments is to find new ways of assessing risks.  We have been working in partnership with Martin Shaw of Reliability Solutions who has developed tools to score the design maturity of new products and relate this value to anticipated field failure rates.  This allows a more quantified overall assessment of risk and identifies where effort should be invested to reduce it. Furthermore, it allows management to make educated decisions based on good data on risk vs reward.

3. Shift left

The concept of ‘shift left’ came out of software development where testing and refining tended to happen in late stages of the development process – and then the product still failed to deliver on performance.

Source: ShiftleftQA

Source: ShiftleftQA

Instead, the focus has shifted to getting the design and planning right.  In manufacturing, this is called APQP or Advanced Product Quality Planning. This shift is already happening in the automotive industry, but we have yet to see this thinking applied across manufacturing generally.

4. Document critical factors at the start

Part of the APQP process is to document critical risks at the start of design and manufacture by bringing parties together to look at what could go wrong and assessing risks based on other experiences. Then, if changes are introduced, you have a base document to refer to ensuring the whole product is still within agreed variances.

So how can a CEO or CFO assure themselves that the warranties they are giving are acceptable and affordable?  I think they need to ensure there is this holistic view of a product; that the focus of risk is in the design and planning stage and that thereafter every change is assessed against a formal and tested set of specifications.  Moreover, this holistic approach continues through product or manufacture changes post-launch.

I would be interested to hear of other companies’ experiences and  ‘pain points’ in terms of faulty products and what help they need from the ‘quality profession’ in dealing with them.