Gain Insight by Implementing the SAP ACS Warranty Management Solution

Warranty Management Lifecycle - Processes

Although businesses are not required to offer warranties, most do. And the warranty process can be very complex, see diagram above. Those who hope to win customer loyalty master this process. Even though warranty programs can be costly and incur legal liability, warranties provide several substantial business benefits, including:

• Increased value proposition: Customers ascribe a higher value to your products because the warranty ensures that a repair or replacement will be available during the warranty term.
• Customer loyalty: A customer remains loyal to your brand during the warranty term to remain eligible for replacement parts or repairs.
• Business intelligence: You gain insight into how your products are used and misused by customers.
• Field results: Your service centers can inspect field-used products to identify failure modes, safety hazards, manufacturing defects, and design flaws. Customers can also report product failures and classify the assumed cause.
• Entitlement Check: You will not pay for late, duplicate, or fraudulent warranty claims, or for spare parts that are not covered by warranty or extended warranty.
• Recall Management: You can identify patterns of failure to spot and manage product recalls.
• Intercompany: You will better manage warranty issues that touch multiple business units and legal entities within your corporation. Intercompany claims can be 100% automated.
• Supplier Recovery: You can claw back payments to vendors and material suppliers for warranty repairs to their products.
• Workbench: User-friendly reporting provides you with a real-time look at your warranty claims performance.
• Authorization: You will save time and money with automated warranty checks and authorization messages to ASPs and dealers.
• Financial figures: Your warranty costs will be automatically posted to financial ledgers to help you track and contain expenses.
• Tax: You will more accurately manage tax issues that arise in warranty claims.

SAP Warranty Claim Processing

In a typical warranty transaction, a customer contacts you or an authorized service provider (ASP) to request service, repair, or replacement under warranty. The warranty claim is validated to ensure that the product is eligible for warranty service.

For example, the date of the warranty claim may be compared against the purchase or delivery date to verify that the claim was filed during the term of the warranty. Similarly, a verification of a use-based warranty may require a comparison of the mileage or hours of use of the product with the limitations within the warranty.

After verification, the warranty service is authorized. If parts are needed, parts are shipped to the ASP from the manufacturer, distribution center, or parts vendor. Internally, the manufacturer may catalog data about the product and the defect to track any potential systemic problems.

To facilitate warranty programs, SAP offers a built-in “Warranty Claim Processing” component. SAP’s standard warranty software provides four main features for processing warranty claims for SAP ERP users.

1. Automation: SAP standard warranty automatically checks warranty claims to determine if the product is still within the warranty’s terms. When the automatic check fails, the warranty claim is flagged for manual adjudication.
2. Integration: SAP standard warranty is integrated into SAP ERP to draw from, and post to, the SAP system’s master database.
3. Defect codes: Users typically create defect code catalogs, enabling direct integration with Quality Management. This integration allows basic analysis of the underlying reasons for warranty claims.
4. Labor codes: Some users maintain very large labor code catalogs, which have to be properly selected by the dealership or service center. Labor codes may determine standard labor hours as well as labor prices for a particular task.

For some businesses, SAP standard warranty claim processing meets their needs. However, SAP’s standard warranty does not provide sufficient functionality out-of-the-box for certain complex business processes, nor does it provide the deep analytical tools often required by customers without additional configuration and development.

SAP Automotive Warranty Management

The SAP ACS warranty management solution was created for more complex warranty management than SAP standard warranty contemplates. ACS stands for automotive consulting solutions and the SAP ACS warranty management solution was initially developed for the automotive industry and its complex warranty relationships and transactions.However, SAP provides aftermarket warranty management solutions with additional features that can help any manufacturer, importer, dealership, or service center manage, or even develop, a warranty program.

The SAP ACS warranty management solution builds on SAP’s standard warranty claim processing component. This means:

• SAP standard warranty features are included or improved in SAP ACS warranty management.
• SAP ACS warranty management is integrated into SAP ECC and S/4Hana and leverages all the standard SAP reports, analytics, and functions.
• SAP ACS warranty management provides end-to-end warranty management without standalone applications or manual processing outside of SAP.

In addition to incorporating SAP standard warranty, the SAP ACS warranty management solution provides additional features to manage relationships, analyze warranty claims, and allocate the costs associated  with warranty repairs and replacements, including:

Fast Warranty Processing Implementation

SAP ACS warranty management can be integrated into your SAP system quickly. This speedy implementation is possible because SAP ACS warranty management is:

• Self-contained: The module contains the standard structures needed for warranty processing.
• Ready to use: Typical customer fields are pre-defined.
• Fully integrated: Once implemented, SAP ACS warranty management integrates with the standard features of SAP.

Customizable: Users and SAP consultants can set the module up to match your business’s practices.

Reduced Project Risk

Implementing ACS warranty management is low risk because the system uses your existing SAP environment and master data. Moreover, the module includes templates for all relevant business activities.

Online Portal for Warranty Claims

If your business uses a network of dealers, authorized service providers, or other third-party repair services to submit warranty claims, SAP warranty claims management provides an online portal to submit and manage those claims throughout their lifecycle. Online portal users can create, submit, provide supporting documentation, and review claims. This allows faster warranty verification and more rapid authorization for the warranty service.

SAP ECC or SAP S/4HANA Integration

The SAP ACS warranty management solution is compatible with SAP ECC 4.7-6.0 release and S/4Hana. By integrating with SAP’s master data management, SAP ACS warranty management can conduct comprehensive warranty record checks, create measurement documents (CS), and post financial and cost (FI/CO) records to SAP. Moreover, SAP’s Business Warehouse (BW) and Business Objects (BO), optionally in SAP Analytics Cloud, as well as other analytic tools such as Microsoft Power BI, can evaluate warranty data.

SAP warranty claim processing uses your SAP system’s master data management of materials (MM), sales and distribution (SD), customer service (CS), plant maintenance (PM), and pricing (SD). To accomplish this, SAP ACS warranty management touches SAP modules for:

• Dealer Portal (SAP Fiori/UI5)
• Archiving Warranty Claims (CA-ARC)
• Business Warehouse (SAP BW), Business Objects, SAP Analytics Cloud
• Quality Catalogs (IS-EC-CEM)
• Warranty Claim Pricing (SD-BF-PR)
• Serial Numbers, Equipment Masters, Functional Locations (PM-EQM-EQ)
• IDoc Interface (BC-SRV-EDI)
• BAPI and RFC integration
• Master Warranties (CS-AG-WA / PM-EQM-SF)
• Material Master (LO-MD-MM) and Serial Numbers (LO-MD-SN), Batch Management
• Classification System for Material Master and Equipment Master
• Message Determination (CA-GTF-BS)
• Online Reporting in ECC or S/4Hana
• Online Reporting Using SAP Query (BC-SRV-QUE)
• Posting Finance Documents (Finance, FI-CO)
• Posting Measurement Documents (CS-IB-MC / PM-EQM-SF-MPC)
• Revenue Account Determination (SD-BF-ACT)
• Service Contracts (SD-SLS-OA-SCO)
• Vehicles in the Vehicle Management System (IS-A-VMS) in SAP Discrete Industries but not SAP R/3 Enterprise
• Vendors (MM) and Customers (SD)
• VSR Checks (FI-SL), BRF+
• ACS-specific functionality

Customized Warranty Entitlement Checks

SAP ACS warranty management solution includes a build-in engine mapped to business rules to automatically validate warranty claims and generate messages approving or rejecting claims. The engine can be customized to partially approve claims that do not satisfy all the business rules that are programmed into the engine. This reduces your costs to process warranty claims.

Automated Warranty Claim Adjudication

The engine can check for duplicate warranty claims and analyze warranty claims for fraud. This ensures that your business does not pay for warranty claims for which it is not legally obligated.

Moreover, automated claim adjudication speeds up authorization of warranty claims. As a result, dealers and ASPs will be paid more promptly and customers will receive service more quickly.

Financial Processing of Warranty Claims

Pricing of warranty claims can be calculated according to SAP standard prices, price catalogs, and specific service labor prices. This provides insight into both the material costs and labor costs associated with warranty claims. These costs are posted to the accounting general ledgers as well as cost center and profit center CO accounts so that they can be reported correctly in financial reports. SAP Warranty also posts to the “Controlling Profitability Analysis” (CO-PA) to support managerial reporting via CO-PA.

Certain U.S. states regulate labor prices and surcharges. SAP ACS warranty management allows labor prices to be set up state-by-state for businesses that have ASPs in multiple states.

Repair labor prices can be flexibly set on all levels: Specifically for each Dealer, for groups of Dealers, per country, per state, per region, or any other criteria.

In ACS, pricing is preconfigured to cover the most typical pricing requirements and rules. Also, customer-specific or more general discounts or surcharges can be applied directly from the sales module. This allows customers to set up any conceivable customer-specific pricing.

However, these pre-set configurations do not limit the flexibility and customization available for specific situations including:

• Warranty invoice: Certain countries, such as Poland, Russia, Turkey, and Indonesia, use specific invoice request processes that are not available in SAP standard warranty management. However, Detering Consulting offers a packaged solution for warranty transactions where a warranty invoice is needed.

Collective processing of supplier recovery claims: SAP standard supplier recovery submits vendor claims on a claim-by-claim basis. ACS warranty management allows collective processing of vendor claims that collects all supplier recover claims within a timeframe and submits them to the vendor under a single umbrella claim.

Tax Determination in Warranty

SAP ACS warranty management integrates with SAP’s tax determination functions to correctly account for tax issues that arise in warranty claims. For example, multi-national environments often involve very complex tax compliance scenarios.

SAP ACS warranty can:

• Include tax refunds with warranty claim refunds.
• Identify tax-exempt transactions.
• Use an external tax engine for the United States and Canada such as Vertex, Taxware, Sabrix, and others.
• Use preconfigured SAP Tax Determination in the rest of the world (ROW).
• Issue Nota Fiscal (Brazil only) or other tax records associated with purchase orders and sales orders and reference previously issued records when tax refunds are paid.

Flexible Warranty Assignment

The SAP ACS warranty management solution allows assignment of different warranties to an installed base product, serial number, specific parts, or an entire assembly. Thus, parts that have a more limited life may be assigned separate warranty coverage than the entire assembly that may be much more durable. When parts are exchanged, the SAP ACS warranty management solution can swap the warranty record with the remaining warranty from the unit that was removed so that the exchanged unit warranty liability is reduced accordingly.

SAP Warranty Solution Brief

As you can see, the SAP ACS Warranty Solution is very comprehensive.  We recommend you download our SAP ACS Warranty Solution Brief to find out more about this solution.

You must understand your warranty process to take corrective action that improves your customers’ satisfaction with the warranty parts and service they receive from you, your ASPs, and your dealers. This understanding is provided through warranty analytics.

SAP ACS Warranty Workbench

This is a standard feature in SAP ACS warranty management. SAP ACS warranty workbench is an agent group workflow and basic reporting tool. However, its true value comes from its section for reporting key performance indicators drawn in real time from the SAP ECC or S/4Hana database. Customers have two options for implementing the warranty workbench:

• SAP ACS Warranty Workbench: This reporting tool resides directly inside S/4Hana (or ECC) and real-time reports are displayed by the workbench.
• SAP Analytics Cloud: Warranty analytic cubes are set up in SAP BW Business Warehouse and made available for dashboard analysis and visualization through SAP Business Objects and SAP Analytics Cloud.

Pre-Defined Warranty Analytics Package

Detering Consulting offers even greater analytical power through its Pre-Defined Warranty Analytics Package. This pre-built package is not part of SAP ACS warranty management but was built by Detering Consulting using years of prior analytics best practices. It uses Microsoft Power BI connected directly to SAP ECC or S4/Hana with an SQL server or SAP business workbench database.

Detering’s Pre-defined Warranty Analytics Package includes:

• Enhanced business analytics and reporting systems
• Audit analytics and reporting systems
• Self-service analytics and reporting systems
• Board of Management and managerial reporting as well as process dashboards
• Business prediction technologies

The advanced analytics reporting is available across SAP warranty, spare part sales, vehicle and equipment sales, and service data. The reports can also be customized to include other functional areas of the business.

Advanced analytics are used to proactively identify and replace defective components. Acting proactively, advanced analytics:

• Reduces costly product recalls
• Manages warranty expenses
• Detects potential fraud
• Improves customer satisfaction for future business leading to higher customer retention
• Maximizes supplier recovery and OEM reimbursement from third-party vendors of parts, materials, and labor
• Monitors evolving warranty policies and rules

Warranty Audit Analytics

This provides users with a graphical auditing tool that allows auditors to track and monitor warranty claims of service centers or retailers. The data visualizations identify trends and outliers by multiple aspects such as:

• Business division
• Model
• Parts

This provides auditors with a summary report for each service center, dealer, or ASP that can be compared against national averages. The report can be used to identify potentially fraudulent warranty claims for closer inspection before triggering a more detailed investigation. The system can also be used to identify claim trends that do not correspond with known equipment faults or indicate an above-average use of a known fault as the basis of warranty claims.

Successful warranty programs manage warranty claims accurately and efficiently, improve customer service, and provide insight into internal, customer-, and supplier-facing processes. The SAP ACS warranty solution provides automated processes that integrate with the financial and reporting modules of your existing SAP system.

However, the SAP ACS warranty management solution is not just about greater efficiency and more features. Implementing the SAP ACS warranty management solution can have a real impact on your business’s bottom line. A few of the business benefits to the SAP ACS warranty management solution include:

Improved Quality Control

Implementing a warranty program is good customer service because it lets customers know you stand behind your products when they fail. However, SAP S/4Hana (or ECC) maintains a database of products under warranty, the timing of warranty claims received, and the defects repaired under those claims.

This database provides a resource for business leaders to identify problems in the design, manufacturing, and use of the products that result in warranty claims. This information can be fed back into the product development process to improve the products as well as the organizational processes used to guide product development.

The SAP ACS warranty management solution supports this feedback approach for enhancing product quality awareness and management. SAP’s warranty management solution is fully integrated with SAP’s quality management (QM) module.  This is part of the SAP supplier quality management improvement cycle.

Integrated Vendor and Supplier Recovery

When subcontractors, vendors, and suppliers provide defective parts and assemblies, many supply contracts allow for recovery by the manufacturer. Manufacturers often leave money on the table because they are unaware that warranty claims are directed to defective parts obtained from third parties. Information from ASPs, dealers, and even in-house service centers may be locked up in organizational silos that never reach the legal and accounting departments responsible for vendor and supplier recovery.

Additionally, some manufacturers find the documentation needed to recover from third party suppliers too cumbersome to justify the added revenue.

However, the SAP ACS warranty management solution stores warranty data in the organization’s master database, allowing ready access by legal and accounting to recover from vendors and suppliers for defective parts. Moreover, each warranty claim can contain documentation from the customer, ASPs, dealers, or in-house service center to support a supplier recovery claim. The supplier recovery process allows you to recoup back some of the money paid to third-party suppliers for defective parts or assemblies.

Most importantly, the SAP ACS supplier recovery process standardizes the sometimes onerous steps it takes to recover costs for defective parts and materials from vendors. This results in a shorter process flow time and ensures that the vendor recovery claim case is accurately documented.

Streamlined Warranty Parts and Services

Integration with SAP ERP allows the management of parts and materials needed for authorized warranty services. Warranty claims that require spare parts shipments to ASPs or dealers can be created seamlessly in SAP from the SAP ACS warranty management solution.

The costs for those shipments can be allocated based on predetermined rules. For example, if the manufacturer bears the costs associated with shipping, the shipments can be sent free of charge. If the customer bears the costs of shipping, the ASP or dealer can be billed so the shipping cost can be passed on to the customer.

More importantly, supply needs can be anticipated based on service notifications, technical service bulletins, recalls, or even an observed wave of claims directed to the same warranty issue. Suppliers or vendors can be notified of the need for parts to satisfy the anticipated warranty claims, and the parts can be shipped to ASPs, dealers, and held in inventory at in-house service centers, or at DC’s.

Increased Information Sharing with OEMs, ASPs, Service Centers, and Dealers

The dealer portal and integration of SAP ACS warranty management solution into SAP can facilitate information sharing and messaging about warranty services between you and your ASPs and dealers. Automated messages can be created and sent when warranty repairs are approved or declined. Similarly, messages can be automatically generated when spare parts are ordered, shipped, and delivered, and warranty repairs are completed.

Having dealers and ASPs reporting warranty repairs through the dealer portal gives you a better picture of what is happening with your products. This information can be difficult to collect if you have an extensive network of dealers and ASPs, mix third-party service providers and in-house service centers, or provide field services.

Improved Support for Service Agreements and Extended Warranties

SAP Standard Warranty (LO-WTY) has no built-in support for service agreements and extended warranties. However, the touchpoints between service contracts and warranty claims can be facilitated by SAP ACS warranty management. For example, ensuring adequate spare parts and labor are available for service contracts can be managed using SAP and SAP ACS warranty management.

Moreover, SAP ACS warranty management supports a fully configurable warranty entitlement check as described previously. This allows entitlement checks for extended warranties to be mapped to any business rules that govern extended warranty parts or service.

This configurable entitlement check can also be used to verify entitlements under service agreements. Click here to learn more about Detering Consulting’s SAP service contract billing solution.

Decreased Warranty Service Cost

Greater insight into warranty claims can help your business to decrease the number of claims and the cost of warranty services. The SAP ACS warranty management solution provides real-time data about the lifespan, failure rates, and failure modes of your business’s products. This information can be used in statistical process controls, such as Six Sigma, to improve product quality and decrease both the number and cost of warranty repairs.

Increased Product Safety

Product safety is improved by the SAP ACS warranty management solution in a few different ways:

• Reporting: Reports can be generated to enhance the visibility of warranty repairs and product defects.
• Recall support: SAP ACS warranty management can also manage recalls and service bulletins, including identifying customers associated with serial numbers subject to recalls and service bulletins.
• Claim history: SAP’s warranty claim history can be used to identify trends in warranty claims and possible defects.

For example, if the data shows that a particular part breaks due to misuse, the SAP BW or Power BI database can quickly identify which part, as well as the part serial numbers. With this information, you can determine if the defect was due to a design problem or a manufacturing problem isolated to a specific batch of parts.

Moreover, the business can alter its warnings and instructions to inform users that the misuse can result in breakage and even update its warranty to exclude breakage due to misuse from coverage. Once the source of the problem is identified, the design or production can be re-engineered to prevent the misuse or the breakage in the event of misuse.

As a result, the product will be safer, fewer warranty claims will be submitted, and customer satisfaction with the product will improve.

More Accurate Financial and Accounting Attribution

SAP ACS warranty management is integrated with SAP ECC and SAP S/4HANA. This allows the sales department to fulfill its role in the spare part sales and return material authorization (RMA) process.

Sales can send replacement parts to the customer, ASPs, or dealers, process RMA returns, and, most importantly, attribute costs and revenues from warranty repairs to business units, profit centers, and sales departments. Sales can also help with the financial tracking of warranty service activities by creating invoices for warranty parts and services.

Similarly, finance and operations can use the integration of SAP FICO and SAP ACS warranty management to track finances and logistic movements associated with warranty activities in real-time. Claim histories and other reports can help fine-tune postings of warranty accruals and actual warranty expenses to the general ledger. SAP ACS warranty management also enables automation of warranty provision to parts and base installations.

It is not often that a software and consulting solution, like SAP ACS warranty management, can provide direct insight into a business’s products and processes. However, by gaining mastery over the data produced by warranty claims, businesses can increase quality, improve safety, control costs, and streamline parts ordering.