Industry Forum

IATF 16949, The Quality Management System for the Automotive Industry requires organisations to develop a way in which warranties will be managed.

Before going any further it would be necessary to understand what the concept of warranty means.

In a typical manufacturing environment we can distinguish three types of “bad feedback” sources regarding quality of the product:

  • First – internal scrap / complaints – occur when the next process within the organisation detects non-conforming product. This type is the best source of data for making our processes better. Costs associated with this will mostly be confined within the organisation, without a need to hire external help. However it is essential that the organisation needs to address the causes and implement corrective actions.
  • Second – so called “zero kilometre” complaints – this occurs when the direct customer (the organisation that uses your product to make parts) finds it’s not what it should be. Now there will be internal costs and external services to deal with, not to mention that our process of resolution needs to be fully in line with customer expectations which can vary between customers, adding to the complexity and cost of the entire process.
  • Third is a field failure, actual warranty cases. It occurs when a problem is detected by the final customer (driver). Costs can rise easily to millions depending on how severe the case is, and if wider recall action becomes necessary. Recall action means that the organisation will replace all potentially faulty products in all cars already on the road.

This is the main reason why organisations need to very carefully analyse all cases of failures to avoid warranty issues and if there is a warranty issue it needs to be very quickly identified, assessed, contained and removed before it escalates to recall action.

A typical warranty case (even a single item) will already generate quite significant costs. Firstly, a dealership will charge the OEM (car maker) with labour and parts, then there are added logistics of bringing the faulty product to the OEM. The OEM will then perform their analysis (which, of course, is not free) and if a fault is recognised as originating from the supply chain, the same scenario will repeat down the supply chain with logistics, analysis, and so on, as presented in the graphic on the right1.

To present the extent of this issue, in 2014 the global annual cost of warranty was in the range of 50 billion US dollars, which is a big increase compared to 30 billion in 2006.

All of this means that organisations wanting to survive, and not lose their profits, must address the possibility of warranty cases in their Operational / Business Systems. This links to two clauses required by IATF 16949, which are located in section 10.

“10.2.5 Warranty management systems

When the organization is required to provide warranty for their product(s), the organization shall implement a warranty management process. The organization shall include in the process a method for warranty part analysis, including NTF (no trouble found). When specified by the customer, the organization shall implement the required warranty management process.

10.2.6 Customer complaints and field failure test analysis

The organization shall perform analysis on customer complaints and field failures, including any returned parts, and shall initiate problem solving and corrective action to prevent recurrence.

Where requested by the customer, this shall include analysis of the interaction of embedded software of the organization’s product within the system of the final customer’s product.

The organization shall communicate the results of testing/analysis to the customer and also within the organization.”2

IATF 16949 presents the requirement but it’s down to the organisation to define the warranty process and how to analyse returned parts, bearing in mind that those parts are actually used, and may not be identical to products that are newly out of the production line.

The answer has already been developed by VDA with input from OEMs and Suppliers, see graphic on the right1. It is called VDA Field Failure Analysis (VDA FFA).

The objective of VDA FFA is to introduce a comprehensive concept for warranty returns analysis. This will consider processes and interactions involved, including analysis on various levels of depth and dealing with results.

VDA FFA will also address how to approach cases when a defect is not discovered, which is referred to as a No Trouble Found (NTF) process.

This standard might be an answer to managing your warranties in a value added way, not just to tick the box, and also will help the organisations to address IATF 16949 requirements.

Industry Forum offers a two day course, developed by the German automotive industry Field Failure Analysis which defines a joint approach between the customer and supplier for the analysis of field returns including no fault found scenarios.

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1 Graphics used are part of VDA Field Failure Analysis training material

2 IATF 16949:2016 “Quality management system requirements for automotive production and relevant service parts organizations”