Warranty Fraud Management

Preface

A multinational manufacturer made an after-sales process assessment to evaluate its performance and compare it with leading practices across comparable industries. The initial focus was on operations in Europe. One of the findings was that the warranty costs across countries within the company were not consistent, taking into account the general cost levels and sales volumes per country. A closer study revealed further inconsistencies and bigger anomalies, comparing different service agents inside each country.

That triggered the need to initiate activities to understand what was going on and ways to detect problems (such as fraud) and reduce the amount of warranty costs, starting with a few pilot countries. The results were almost instant. Many service agents had, over the years, learned to work around the seemingly loose controls of the manufacturer, and significant levels of fraud were detected. The manufacturer decided to accelerate the work and widen the focus to other European countries, which yielded similar results.

After the successful European implementation, the regional service heads of the manufacturer were approached for targeting the same improvements at the global level. There was a high level of skepticism, as indicated by the statement of one of the senior managers: “Yes, the European results were impressive, but Europe was crap. You are welcome here, but you won't find anything. We know our service agents, and our controls are watertight.”

After less ...