If you’ve ever purchased a television, cell phone, washing machine, car or other expensive piece of consumer technology or equipment, you’re most likely familiar with the concepts of a warranty and service contract. They exist to help protect the consumer and give them some peace of mind should a product that they spent a lot of money on turn out to be defective or fail to perform for an ideal period of time.
Well, commercial and industrial equipment is very similar to those consumer products that I listed. They are significant investments for facilities managers, building owners or factory operators, and they have a very serious impact on operations should they fail.
For that reason, the original equipment manufacturers (OEMs) that create commercial and industrial equipment and machinery warranty their products for a certain period of time – usually about two years. This is also why these OEMs will sell service contracts following those two years, so that the owners can get their equipment maintained and repaired even when it’s no longer under warranty, since it would be a significant financial burden to replace.
But warranties and service contracts can 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. But 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 properly, or in ideal conditions, or because it wasn’t set up to the manufacture’s specifications, or because it wasn’t properly cared for, they’ll try to get the OEM to fix it at their expense because it’s under warranty.
Warranties often come with conditions and they’re 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 waste – plain and simple. That truck and repair person are now 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.
In my next post on the Modern Equipment Manufacturer, I’ll look at how data harvested via the cloud can provide OEMs with business intelligence necessary to more effectively sell and fulfill service contracts – and even sell more equipment – to equipment owners.