Total cost to perform the process "process warranty claims" per warranty claim processed

This measure calculates total annual cost to perform the process "process warranty claims" per warranty claim processed. Total cost is the sum of personnel (compensation/benefits), systems (direct and/or allocated), overhead (direct and/or allocated), other internal, and outsourced costs. A warranty claim is a claim by a customer/product owner for a product under warranty, and usually entails either repair or replacement. The Process "process warranty claims" includes [Identifying, investigating, and processes warranty claims. This process includes: receipt and validation of a warranty claim; definition and diagnosis /root cause analysis of an issue and recommendation for corrective action; the determination of responsibility for settlement of the claim; the transaction being approved or denied; and the originator being notified and payment authorized. In the case of a recurring event, further investigation (definition and diagnosis or root cause analysis) is performed, and a recommendation for corrective action is made and implemented in production/design. It ends when the claim is closed.]. This Cost Effectiveness measure is intended to help companies understand this cost expenditure related to the process "Process claim, adjustments, approvals and other service events".

Benchmark Data

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Measure Category:
Cost Effectiveness
Measure ID:
104867
Total Sample Size:
596 All Companies
Performers:
25th Median 75th
- $50.00 -
Key Performance Indicator:
Yes
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Compute this Measure

Units for this measure are Dollars.

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Total cost of the process "process warranty claims" / Total number of warranty claims processed

Key Terms

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Total cost for a process, process group, or function consists of the following five components.

Internal/In-house operating cost consists of the first four components (personnel, systems, overhead, and other).

Personnel Cost

Personnel cost is the cost associated with personnel compensation and fringe benefits of employees (i.e., those classified as FTEs which includes both full-time and salaried/hourly employees) contributing to each respective process. Personnel cost should include all of the following costs.

Employee Compensation: Includes salaries and wages, bonuses, overtime and benefits.

Fringe: Includes contributions made towards the employees' government retirement fund, workers compensation, insurance plans, savings plans, pension funds/retirement plans, and stock purchase plans. This should also include special allowances, such as relocation expenses and car allowances.

Systems Cost

Systems costs include all expenses, paid or incurred, in conjunction with:
Computer hardware or computer software acquired by the organization or provided to the organization through service contracts.

Any related costs to process, service and maintain computer hardware or computer software. The costs of providing and maintaining services for each applicable process (e.g., computer system(s) processing (CPU) time, network/system communication charges, maintenance costs for applications and data storage). This includes the costs related to LANs, WANs, etc. This does not include one-time costs for major new systems developments/replacements. Consultant fees should not be included in depreciation of new system implementations. Include only those costs that occur more than six (6) months after implementation, as normal system maintenance costs. Any systems cost (e.g., maintenance) which is outsourced to a third party supplier should be captured in the separate cost category labeled outsourced cost.

Systems cost should include all salaries, overtime, employee benefits, bonuses or fees paid to full-time, part-time or temporary employees or independent contractors who perform services relating to computer hardware, computer software, processing or systems support.

Overhead Costs

For the purpose of this study, provide the total actual overhead costs for the year related to the specified process. These are costs that cannot be identified as a direct cost of providing a product or a service. Include the primary allocated costs such as occupancy, facilities, utilities, maintenance costs, and other major costs allocated to the consuming departments. Exclude systems costs that are allocated, since these will be captured separately as systems cost.

Other Cost

Other costs are costs associated with the specified process, but not specifically covered in personnel cost, systems cost, overhead cost and outsourced cost in this questionnaire. These other costs include costs for supplies and office equipment, travel, training and seminars. Include the cost of telephones, except for that portion captured in systems cost.

External/Outsourced Cost

In determining outsourced cost, include the total cost of outsourcing all aspects of the specified process to a third-party supplier. Exclude one-time charges for any type of restructuring or reorganization. Outsourced costs should also include costs for intracompany outsourcing (i.e., reliance on a shared services center or other business entity).

Cost effectiveness measures are those in which two related variables, one of which is the cost and one of which is the related outcome related to the expenditure are used to determine a particular metric value.

The metric value which represents the 50th percentile of a peer group. This could also be communicated as the metric value where half of the peer group sample shows lower performance than the expressed metric value or half of the peer group sample shows higher performance than the expressed metric value.

Measure Scope

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Cross Industry (8.0)

  • 6.3.2.1 - Receive warranty claim (20096) - Receiving incoming warranty claims. Route claim to correct department. Document claim.
  • 6.3.2.2 - Validate warranty claim (12671) - Ensuring that the claim falls within the parameters of the warranty in question. After validation is made, the claim must be investigated.
  • 6.3.2.3 - Investigate warranty issues (20097) - Executing investigational and analysis of warranty claims. This involves notification and definition of a warranty issue, includes the scheduling of a field service agent to perform further investigation; the request and receipt of defective parts; and diagnosis/root cause analysis. This concludes with the receipt of the result and recommendation for corrective action.
    • 6.3.2.3.1 - Define issue (20098) - Defining the issue of the claim. The warranty team will look into the issue and understand whether it is covered by the claim code or if more detail is required. Field service will be scheduled to further qualify the definition of the issue and to collect more evidence.
    • 6.3.2.3.2 - Schedule field service (12677) - Scheduling additional investigative field service. This is performed for high priority claims or claims that require additional investigation. Field service engineers will gather additional information, perform further investigation, and qualify the definition of the issue.
    • 6.3.2.3.3 - Request and receive defective part (12678) - Requesting receipt of a defective part for further investigation.
    • 6.3.2.3.4 - Investigate issue/perform root cause analysis (20099) - Investigating claims by an appropriate functional representative. Once the issue has been clearly defined and diagnosed and a recommendation for corrective action is determined, it will be provided to the warranty management team.
    • 6.3.2.3.5 - Receive investigation result/recommendation for corrective action (20100) - Receiving investigative results to assess claim approval or denial. The warranty team will assess the results of the investigation and the recommendations for corrective action.
  • 6.3.2.4 - Determine responsible party (20101) - Identifying responsible party for a claim. There is no negotiation with the supplier at this point. There can be multiple warranties applicable to the same part: a new part warranty, a new product warranty (for the product the part is installed on), and a supplier warranty from the company that last repaired the part. The information required for this decision would be the output of Receive component/part and analyze fault [19728]."
  • 6.3.2.5 - Manage pre-authorizations (20102) - Authorizing claims prior to submittal.
  • 6.3.2.6 - Approve or reject warranty claim (12668) - Following Defining issue [20098], an approval or rejection with be made against the warranty claim. If it is deemed that the claim falls within the warranty parameters, the claim will be approved. If the claim is deemed to fall outside warranty parameters, the claim with be rejected.
  • 6.3.2.7 - Notify originator of approve/reject decision (20103) - Contacting the originator of whether the warranty claim has been approved or rejected.
  • 6.3.2.8 - Authorize payment (20104) - Allowing for a payment to be made to the claimant.
  • 6.3.2.9 - Close claim (20105) - Archiving and closing the warranty claim after a final decision has been made to either approve or reject.
  • 6.3.2.10 - Reconcile warranty transaction disposition (12667) - Assuring that the warranty transaction has been completed.