How data and transparency help OEMs fight warranty abuse

November 7, 2018
Richard Theron

If you’ve ever purchased a television, cell phone, washing machine, car, or other expensive pieces of consumer technology or equipment, you’re probably familiar with the concepts of a warranty and service contract. They exist to help protect the consumer and give them peace of mind in case a product that they spent a lot of money on turns out to be defective, or fails to perform for an ideal period of time. 

Well, commercial and industrial equipment is very similar to those consumer products. They are significant investments for facilities managers, building owners, or factory operators, and they have a severe impact on operations should they fail. 

For that reason, the  OEMs that create commercial and industrial equipment and machinery warranty their products for a certain period, usually about two years. This is also why these OEMs will sell service contracts following those two years so that the owners can have their equipment maintained and repaired even after the warranty period since it would be a significant financial burden to replace. 

Warranties and service contracts create interesting challenges for OEMs. Warranties can be abused by owners and become an albatross for the manufacturer. Service contracts can be a profit center for OEMs, but they’re sometimes hard to sell. The cloud can help OEMs overcome both of those challenges. 

What is warranty abuse?

We all want to assume that everyone is on the up-and-up, but that’s not always the case. There are some folks that will use a piece of equipment or a product for purposes that it isn’t meant for. They’ll use it in conditions that aren’t ideal. They’ll try to install it themselves instead of hiring a professional to save a quick buck and not set it up properly. Or, they’ll skip recommended servicing and maintenance because it would be inconvenient for them. 

Then, when that piece of equipment fails because it’s not being used correctly or in ideal conditions, or because it wasn’t set up to the manufacturer’s specifications, or because it wasn’t properly cared for, they try to get the OEM to fix it at their expense because it’s under warranty. 

Warranties often come with conditions, and they will be voided under certain circumstances. However, it can be difficult for an OEM to identify if the conditions of their warranty have been violated. This can lead to an OEM using its resources, rolling out a truck and repair person, at no cost to the owner to repair a product when the owner should be compensating them for that time and service. 

This may seem somewhat innocuous, but it’s a waste, plain and simple. That truck and repair personnel are being utilized for a job that the company isn’t getting paid for when it should be. And that job is keeping that resource from servicing another paying customer. The result is lost revenue and productivity for the OEM. But what can they do about it? 

Combating warranty waste and abuse

There is a way for the OEM to identify this abuse of its warranties in advance. Cloud-enabling their equipment will have given the OEM insight into the product following its installation to ensure that it was set up correctly. Data available via the cloud could be used to gain insight into the conditions that the equipment was operating in and if it was being abused by the owner. It could even be used to ensure that all recommended maintenance had been done. 

Without transparency, the OEM has no window into how its products have been used by the equipment owner. They don’t know if they’ve been abused, installed incorrectly, or serviced to their specifications. They can guess when they get on-site to do a repair, but they lack the evidence to justify charging the equipment owner for servicing their equipment. 

By cloud-enabling their equipment and harvesting their data from the field, OEMs can gain valuable insight and transparency into their products and how they’re being used. That can go a long way towards ensuring that revenue, time, and productivity isn’t lost servicing a warranty-abusing customer. 

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Richard Theron
Richard Theron is the product Line manager for Fieldserver and cloud at Sierra Monitor, where he works intimately with companies in the building automation, industrial automation, energy management and life safety markets to help them cloud-enable their equipment.

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