Factory's warranty costs current state

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EERO KAAJA

FACTORY’S WARRANTY COSTS CURRENT STATE

Master of Science thesis

Examiner: prof. Petri Suomala Examiner and topic approved by the Faculty Council of the Faculty of Engineering Sciences

on 3rd February 2016

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ABSTRACT

EERO KAAJA: Factory’s warranty costs current state Tampere University of technology

Master of Science Thesis, 86 pages April 2016

Master’s Degree Programme in Mechanical engineering Major: Industrial management

Examiner: Professor Petri Suomala

Keywords: manufacturing industry, warranty costs, product quality

This thesis was written for the Metso Minerals factory on the current state of the factory’s warranty costs. Manufacturing industry companies are always facing costs of non-quality, and in this case the warranty costs represent a major part of these. Therefore, warranty reports and warranty costs represent a major part of actual product quality and reliability levels, which furthermore affect business and customer satisfaction.

The purpose of this study was to define and categorize the current state of warranty costs, thereby widening organizational awareness of the factory’s warranty costs, warranty cases and product quality. There was also a great need for figuring out the development targets for creating a new system for warranty reports. The main contribution of this study was in showing, how important it is to have a well-categorized and a high-quality warranty data behind the quality management decisions and actions, thus observing what kinds of findings this warranty awareness foregrounded from the data.

The research question of this thesis was how the warranty data could be converted into warranty information for enabling better quality awareness and warranty management actions for making better crushing and screening products in future. This problem has been answered and discussed in this thesis.

In this thesis the current state of warranty costs and reports of the company has been gone through, listed and presented in various ways. This sheds light on the nature of product quality, and the amount of breakdowns by product models, modules and even by parts.

As a result of this thesis several findings on warranty costs have been made in the upper product category level and by product, but also in the lower component level, and through these findings the warranty cost awareness has increased. Five main steps to gain warranty information from warranty data were formulated, to help the company in the follow- up of product quality levels on-time without long delays. Warranty data quality challenges and product quality cases categorized by machine operation time, broken module and broken submodule have been assessed. Based on the findings of this thesis, several actions have been executed.

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TIIVISTELMÄ

EERO KAAJA: Tehtaan takuukustannusten nykytila Tampereen teknillinen yliopisto

Diplomityö, 86 sivua Huhtikuu 2016

Konetekniikan diplomi-insinöörin tutkinto-ohjelma Pääaine: Teollisuustalous

Tarkastaja: professori Petri Suomala

Avainsanat: valmistava teollisuus, takuukustannukset, tuotelaatu

Tämä diplomityö on kirjoitettu Metso Mineralsin tehtaalle tehtaan takuukustannusten nykytilasta. Valmistavan konepajateollisuuden yritykset kohtaavat aina toiminnassaan laaduttomuuden kustannuksia, ja tässä tapauksessa takuukustannukset käsittävät suuren osan näistä laaduttomuuden kustannuksista. Tästä syystä takuuraportit ja edelleen takuukustannukset edustavat valtaosaa todellisesta tuotelaadusta ja luotettavuudesta, joka osaltaan vaikuttaa yrityksen liiketoimintaan ja asiakastyytyväisyyteen.

Diplomityön tarkoitus oli määrittää ja kategorisoida takuukustannusten nykytila, ja edelleen lisätä tehdastason tietoisuutta takuukustannuksista, takuutapauksista ja tuotelaadusta. Tämän lisäksi diplomityöllä oli tarve määrittää kehityskohteita uuden takuutietokannan luomiseen. Päätarkoitus työlle oli esittää, kuinka merkittävää on saada hyvälaatuista ja jaoteltua takuutietoa laatujohtamisen päätösten tueksi, ja mitä eri löydöksiä takuutietoisuus voi nostaa esiin.

Tutkimuskysymys tälle työlle oli kuinka takuudatasta saadaan todellista takuuinformaatiota, jotta parempi laatutietoisuus ja takuun johtamisen toimet mahdollistuvat parempien kivenmurskaus ja –seulontalaitteiden luomiseksi tulevaisuudessa. Tähän kysymykseen on vastattu tässä työssä.

Tässä diplomityössä takuutapausten ja takuukustannusten nykytila on käyty läpi ja esitelty erilaisin tavoin. Tämä selvitys on avannut kohdeyrityksen tuotelaadun ja mahdollisten laatuongelmien luonnetta tuotteittain, moduuleittain ja jopa komponenttitasolla.

Lopputuloksena takuukustannuksista on tehty lukuisia löydöksiä niin ylätasolla tuotekategorioittain ja tuotemalleittain kuin myös komponenttitasolla, ja näiden löydösten avulla tietoisuus takuutapauksista on kasvanut. Tämän lisäksi on listattu viisiportainen prosessi todellisen takuuinformaation saamiseksi takuuraporteista helpottamaan yrityksen tuotteiden laatutason välitöntä seurantaa ilman suuria viiveitä.

Edelleen on arvioitu takuudatan laadun muodostamia haasteita ja takuuraporteilla esiintyvien laatuongelmien kategorisointia koneen käyttötuntien, hajonneen moduulin ja myös alatason komponentin perusteella. Tämän diplomityön löydösten perusteella on käynnistetty lukuisia toimia.

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PREFACE

Studentship at Tampere University of Technology has been a great journey, which has lead to several challenges, numerous exercises, and finally countless experiences of success. I’m very grateful for these past six years. Linkage between studies and work has been possible mainly because of Metso and my foreman Mr. Aapo Riponiemi. This linkage has helped in reflecting my studies with my work and vice versa, which has aided in choosing the right courses and major subject, and further given the motivation to successfully execute my studies.

These years in Tampere University of Technology have given me very good friends who will always be a part of my life. TTMK, a motoring club of TUT and its clubroom have been my second family and only living room during the whole time of studies. Without TTMK I wouldn’t be here today. Also Herwannan Hauiskääntö, an athletic club of TUT has given me a great circle of friends to support my interests of gym and athletics, which has kept up my spryness during the studentship.

The subject for this Master’s thesis was formulated in Metso Minerals with my advisor Quality Assurance Manager Mr. Aapo Riponiemi. I want to thank both the company and especially my advisor for giving me this opportunity to write this thesis from such an interesting topic, and to widely utilize my working experience, studies and interests during this thesis process. I could ideally start to work with this study shortly after passing my last courses at TUT, which made the timetable for this Master’s thesis great. I also want to thank my advisor Professor Mr. Petri Suomala from Tampere University of Tech- nology, who has helped me to complete the writing of this thesis.

The biggest thanks belong to my parents Taru and Mauri who have always supported and encouraged me with my studies. Now these studies are finally completed, and graduation is reached.

Tampere, 29.4.2016

Eero Kaaja

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LIST OF FIGURES

Figure 1 – From detecting to ensuring (Akkasoglu, et al., 2013, p. 283) ... 6

Figure 2 - Quality costs categorization (Wood, 2013, p. 5) ... 8

Figure 3 – Hidden failure costs (Wood, 2013, p. 7) ... 9

Figure 4 - Implication of cost of issue (Wood, 2013, p. 8) ... 10

Figure 5 - Three stage warranty (Blischke & Prabhakar Murthy, 2006, p. 45) ... 14

Figure 6 - Reliability curve (Prabhakar Murthy & Jack, 2014, p. 34)... 15

Figure 7 - Warranty data flow and use (Blischke, et al., 2011, p. 11) ... 18

Figure 8 - Warranty Process Elements (Blischke, et al., 2011, p. 64) ... 21

Figure 9 - Factors influencing warranty costs (Blischke, et al., 2011, p. 9) ... 23

Figure 10 - Warranty process (Kaaja) ... 30

Figure 11 – Example LT (brochure) ... 36

Figure 12 – Example conveyor structure ... 37

Figure 13 – Claim costs and orders intake ... 40

Figure 14 - Cases and orders by year ... 40

Figure 15 - Warranty cases per unit sold ... 42

Figure 16 - Warranty-% per orders value ... 42

Figure 17 – Average costs accepted by time ... 43

Figure 18 - xx and xx warranty costs by modules ... 44

Figure 19 - Claim costs by crushing hours ... 45

Figure 20 - C-series jaw crushers claim amounts ... 46

Figure 21 - B-series Barmac crushers claim amounts ... 46

Figure 22 - GP-series crushers claim amounts ... 46

Figure 23 - Lokotracks claim amounts ... 47

Figure 24 - ST mobile screens warranty claim amounts ... 47

Figure 25 - Hydraulic hoses and other hydraulic leakages ... 47

Figure 26 - Warranty cases per products sold ... 48

Figure 27 - Warranty costs per orders value ... 48

Figure 28 - Line assembly LT compact warranty cases ... 49

Figure 29 - Place assembly LT compact warranty cases ... 50

Figure 30 - Warranty costs outside of warranty period categorized by modules ... 52

Figure 31 - Warranty costs outside of warranty period categorized by product models ... 52

Figure 32 - Warranty costs by products ... 53

Figure 33 – LT XXX & LT YXX warranty costs by modules ... 53

Figure 34 - xxx warranty costs by submodules ... 54

Figure 35 – xxxx, LT XXX crusher warranty costs by submodules ... 54

Figure 36 – LT YYY warranties by modules ... 55

Figure 37 – Stationary YYY crusher warranty costs by submodules... 55

Figure 38 - YYY & LT YYY crusher warranty costs by submodules ... 56

Figure 39 – ST XX warranty costs by modules ... 56

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Figure 40 – LT YYY warranty costs by modules ... 57 Figure 41 - xxxx cases by hours ... 63

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LIST OF SYMBOLS AND ABBREVIATIONS

CFC Customer feedback collection

ECR Engineering change request

LT Lokotrack machine

PDM Product Data Management

ST Mobile screen machine

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1 INTRODUCTION

1.1 Background

Metso Minerals Factory 3 has put effort into its manufacturing quality and supplier quality management, as the Lean culture has been implemented to the factory and its working methods. These actions have already yielded some results during the last few years. From the quality management’s viewpoint, the quality problem-solving process description has been re-written, and quality team workforce along with wide know-how have increased.

For example, quality complaints process flow has been elevated, and the suppliers’ corrective actions have improved with the help of the new Quality Notification reports, and a wider quality team. In all the Quality Notification cases the suppliers have to fill in a proper root cause analysis and plan corrective actions for the arisen quality issue, which is a step into the right direction for quality improvement. The resolution of the supplier- based quality issues during the production has improved, as well as the suppliers’ problem-preventive actions at their workshops.

On the other hand, total quality costs (including the warranty costs) amount to much more than supplier quality. Quality costs consist of supplier quality, manufacturing quality and engineering quality, and none of them can be ignored. Measurable and known quality costs comprise the direct rework costs, direct supplier-based quality costs and direct warranty costs.

In the modern globalized public economy it is important to do the right things right. Cost awareness in addition to the material and information flows are the center-stage features to make it happen. It is not possible to manage quality costs if their composition is unde- termined, or if the parties are unaware of their definition. In this case, the majority of the quality costs consist of warranty costs, and at the same time the definition of warranty costs is still in its infancy.

The main goal of this thesis is to define the current state of Metso factory’s warranty costs, determining which steps should be implemented in the attempt to enhance cost- awareness, and to figure out how to utilize the gained information for corrective actions concerning the warranty cases.

1.2 Metso Corporation and Factory 3

With its 2.9 billion euro net sales Metso is the world’s leading industrial company serving the aggregates, recycling, oil, gas, mining and process industries. Metso is listed on the

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NASDAQ QMX Helsinki in Finland. This thesis is written for the Metso Minerals capital business area, and furthermore for Metso Aggregates industry, that provides crushing and screening equipment for the constructing business, and especially minerals processing equipment. Metso is the leading technology and services provider for end-to-end minerals processing, and Metso Aggregates comprises 23 percent of Metso net sales.

Factory 3 produces crushing and screening machines, including C-jaw crushers, B-series crushers, GP- and HP-series cone crushers, Lokotrack-series mobile crushers (LT) and ST-series mobile screens. This thesis is based on these machine types. (Metso, 2015)

1.3 Introduction of study

On the background of this study was the motivation to aid the company to succeed in its ambitious quality targets in year 2016 and further in 2017, in order to achieve financial success and the customer satisfaction goals also in the future. This requires remarkable improvement in the total amount of warranty costs, which constitute a major part of the total quality costs. At the center of this thesis was to figure out and analyze the current warranty costs, warranty reports and warranty data to clarify several topics, which are presented below.

Firstly, of which factors do the factory’s warranty costs consist of was the question to get started with. It is already widely known how much warranty costs and warranty cases each product incurs, but any deeper analysis about why these costs incur or which parts or modules of the products are failing was not made, and the warranty system did not enable driving these reports automatically. In addition, it wasn’t clear whether there could be any possibility of finding some regularity in the machines’ product quality behavior, in order to avoid some of the costs in the future by preventive or corrective actions, and furthermore to improve product quality for better competitiveness, financial success and customer satisfaction.

In addition, with the help of analysis of warranty costs by for example product structures, operating hours and product models, the quality resources could be better targeted for better effectiveness, which was the second big motivation for this thesis – which ma- chines, parts and modules would require attention in the future from low-hanging fruits viewpoint or bigger product quality improvement viewpoint. It is important to focus on the right areas of product quality, and this thesis is written also because of this need for information.

The research question of this thesis is how the warranty data could be converted into warranty information for enabling better quality awareness and warranty management actions, in order to make better crushing and screening products in the future.

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There were also a few extra purposes behind this thesis; the current warranty handling process and warranty report database will be replaced by new ones during the year 2016, and this project requires a wide know-how on the current situation with its pros and cons.

Studying the old warranty reports will provide a deep analysis and process improvement proposals, that assist in the development of a better handling process, better warranty reports and a better follow-up for the future warranty cases. These topics are relevant for future warranty analysis, and this thesis provides knowledge on product quality level improvement. Follow-up should be executed as real-time monitoring instead of manually going through thousands of reports at a time.

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LITERATURE REVIEW

This section presents and examines the literature about quality, cost management, warranty and warranty costs. This section is based on several books and journal articles on the topics.

First, this section outlines the role of quality and quality management. Next, it describes warranty and different warranty types. After that, it describes different warranty risks and warranty costs, which are important to understand when managing the warranty costs.

Finally, this section presents the warranty process flow.

1.4 Quality

Quality and product quality both have several different explications, but all of these basi- cally handle the same themes. Quality can be defined as goodness or merchantability of a product, in other words fulfilling the requirements intended for the product. A high- quality product fulfils its requirements of fitness and merchantability without problems, and it works like it should and as it’s designed to work. (Blischke & Prabhakar Murthy, 2006, pp. 23-25) (Andersson & Tikka, 1997, pp. 16-37) (van der Wiele, et al., 2013, pp.

4-5)

Quality can be divided into different categories, and one common categorization is to divide quality into design quality and manufacturing quality, where design quality represents the best possible quality achievable on the design table, and manufacturing quality includes all of the different working phases from the suppliers’ raw-material depot to manufacturing, the assembly department and finally the finishing of the product. Design quality allows the manufacturing department to produce high-quality products, but it won’t materialize without high manufacturing quality. (Andersson & Tikka, 1997, pp.

27-28)

The other alternative for understanding the concept of quality is to dissect it from the five following dimensions:

 Product performance consists of several multi-dimensional sets of measurable properties of a product or its elements which can be calculated to assess the product’s ability to perform its functions. Product performance can be represented by, for example, fuel consumption, speed or capacity.

 Product durability represents the measure of a product’s lifetime. Durability can be influenced and controlled by service and maintenance.

 Product non-conformance describes how un-identical separate similar products are. Conformance may vary because of the production process, for example due

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to the material or assembler. Conformance can be measured by product performance features such as speed or capacity and their variation.

 Product serviceability depends on the facilities and speed with which the failed item can be repaired or restored to its working state. Serviceability is linked to reparability through the level of ease and amount of costs expended to repair the product. A product with high serviceability is quick and inexpensive to repair.

 Perceived quality is a consequence of the customer’s subjective assessment of product quality, which usually differs from objective and actual quality. In comparison, objective quality is a result of the technical and functional specifications and a product’s ability to fulfill them. (Blischke & Prabhakar Murthy, 2006, pp.

23-25)

Like shown above, determination of quality isn’t simple or unambiguous, but understanding these several different dimensions offers some scale for the question how quality can be perceived. The case company of this thesis handles quality as engineering quality, suppliers’ quality and manufacturing quality, and all of these are presented further on in this thesis. The total quality of a product is the sum of these three elements.

1.4.1 Quality management

The evolution of quality management has come a long way from inspections to integrated Total Quality Management, or the quality conception of Lean production of finding the wastes. Quality control has also gone through several changes during the last decades. A simplifying figure about this progress is presented below.

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Figure 1 – From detecting to ensuring (Akkasoglu, et al., 2013, p. 283)

In figure 1 above the main progress of quality management is shown in one picture. The last hundred years have changed quality management from inspection culture into total quality management. At first, quality culture was based on inspections and repairing. Fur- thermore, quality management has become common, and the quality culture is shared through the whole organization including every department, because quality is common.

The whole quality culture began from the quality inspection ideology, the main goal of which was only to detect deficiencies in manufactured parts. That was a good start but didn’t actually fix the problem which the quality control philosophy tried to do instead.

Quality control brought forth a perceptive idea, that looking solely after the errors and repairing failed parts was much less efficient than finding the sources of errors and fixing them. Several different quality tools were invented to intensify the root-cause analysis:

seven tools of quality, PDCA-cycle or five-times-why as an example. Process control is one of the headlines of quality control, but detecting the issues improves quality only afterwards the defects are found. (Andersson & Tikka, 1997, pp. 28-30) (Akkasoglu, et al., 2013, pp. 281-285) (van der Wiele, et al., 2013, pp. 21-25)

Furthermore, quality assurance gave more depth for process analysis in order to find root- causes for errors. Unlike quality control, quality assurance culture is more effective in detecting process root-causes, but all in all the root-causes are diversified by the causes

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which haven’t yet affected any problem. After the inquiry quality levels could be managed with preventive actions, not just with corrective actions based on existing quality issues. Prevention-based system improves quality and increases productivity by focusing on product and process design. By integrating quality into the design, producing non- conforming products is prevented. Quality assurance takes the customer’s needs into the process and develops the structure and design based on this. (van der Wiele, et al., 2013, pp. 24-25)

Quality management represents an even higher level of handling quality. Quality management spreads the quality ideology through the whole organization and also extends quality as an issue to the customers and suppliers. Some activities, such as documentation, are needed between the parties for successfully handling quality, as organizations have become more complex and the amount of suppliers has increased. Standardization and the demand for certification has been fulfilled with ISO9000 quality standard, which is one example of quality management – harmonization and internationally accepted stand- ards and certifications enable better partnerships with wider trust between the parties. In quality management, quality costs and quality levels are reported to the top management level. In addition, educating the management about quality performance benefits a company. There should be a high focus on quality costs. (van der Wiele, et al., 2013, pp. 24- 31) (Wood, 2013, pp. 70-71) (Akkasoglu, et al., 2013, pp. 286-287)

In Total Quality Management the reason for quality management has finally changed from market pressure to the general importance of a high quality level. Quality is common to all, and a wide knowhow in quality benefits all parties. (Akkasoglu, et al., 2013, pp.

287-288)

1.4.2 Quality costs

Quality costs mainly consist of making the faults, finding and fixing them. The categorization of the quality costs may vary between businesses and companies, and as usual, a company may use the method which suits its needs the best. The Prevention-Appraisal- Failure model is a generic, and one of the oldest means to categorizing quality costs. It includes prevention costs, appraisal costs, internal failure costs and external failure costs:

all of them together comprise the total quality costs. This categorization is presented in the figure below. (Wood, 2013, pp. 4-5)

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Figure 2 - Quality costs categorization (Wood, 2013, p. 5)

Another common method for categorizing quality costs is to divide the costs according to the responsible parties into supplier based quality costs, company based quality costs and customer based quality costs. Every department in an organization generates quality costs. Added to that, also other parties like suppliers and customers are the cause of some fraction of a sum of the quality costs. This means that quality is shared, and definitely not just the quality team’s problem. The follow-up of the quality costs is one of the most effective tools for quality management. Poor quality can be expressed via a sum of money with the help of quality costs. Still, utilizing quality costs as a tool of quality management requires a good cost-awareness and making use of the cost information in designing and following-up quality improvement projects. Formal measurement of quality costs shows the main areas to be centralized in managing quality and decreasing the costs of poor quality. (Andersson & Tikka, 1997, pp. 31-32) (De, 2009, pp. 1117-1118)

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Figure 3 – Hidden failure costs (Wood, 2013, p. 7)

Quality costs follow-up and utilization has an obvious challenge: quality costs accounting does not expose all of the costs. This problem is indicated in the above figure, where the classification of failure costs is presented. Failure costs represent a typical example of quality costs, and costs of failure should always be evaluated for the reports. Still, usually only the top of the iceberg is well-known and measured. The typical amount of reported quality costs can be around ten-to-forty percent or even less. Indirect costs of quality are usually at best estimated or totally missing from the calculation. These hidden failure costs can be beheld as indirect quality costs. The role of hidden costs is important to understand while making decisions about quality improvements – total costs are much bigger than the reported ones, and if this is not understood, the quality improvement re- sourcing may fail and inflict inadequate results for the company’s quality improvement.

However, the most crucial cost is always the cost of the ex-customer, to whom the company did not succeed to adhere. (Andersson & Tikka, 1997, pp. 31-33) (Wood, 2013, pp.

7-9)

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Figure 4 - Implication of cost of issue (Wood, 2013, p. 8)

A widely-known matter is, that more spending on prevention results a lower cost of bad quality, and likewise lowered spending on prevention results in a higher cost of bad quality. This relation is shown in the figure above. With this information, remembering the iceberg model of costs, granting adequate resources for preventive measurements, root- cause analysis and corrective actions at suppliers’ or company’s sites would generate great results in the total costs of quality. Because every single failure always has a root cause, and root causes are always preventable, preventing the root causes is cheaper than letting the issue affect the customer’s side. Designing and manufacturing a product right the first time will always cost less than fixing the errors in the future. This difference varies by an error and company, but the main principle stays the same. (Wood, 2013, pp.

6-11) (Wood, 2013, pp. 107-108)

Quality costs have a direct effect on profit and the whole company’s profit-creating ability. Day-to-day quality system activities such as in-process control, final product control or quality measures, prevention activities or corrective actions form a part of the total cost of quality, which also includes actual failure costs, and all of the unknown quality costs discussed before. All money savings made in the total cost of quality will directly shift to pretax earnings. The total amount of quality costs decreases the operating result of a company. (Wood, 2013, pp. 107-109)

1.5 Role of Warranty

Customers are recurrently uncertain about product performance and reliability. All kinds of poor product quality cases cause disadvantage to the customer, and for these unwanted cases a warranty is a good assurance of a product’s satisfactory performance. A warranty is typically an agreement or a contract between a manufacturer or seller and buyer. The intention of a warranty is to ensure that a product performs according to its requirements.

(Blischke & Prabhakar Murthy, 2006, pp. 40-41) (Blischke, et al., 2011, p. 7) (Jun &

Yonghua, 2010, p. 1)

Warranty can be reviewed from different viewpoints, which are examined in the following sections.

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1.5.1 Buyer’s Viewpoint

One of the main purposes of a warranty is to function as a protective contract for the buyer. If the product fails during the warranty period, according to the warranty terms the manufacturer or seller has an obligation to fix the product or to replace it with a new one, which means that the buyer may continue using the product with the nearest possible loss.

Besides being a protective contract, a warranty is also an informational feature expressing that the product should be reliable to use. In addition, a longer warranty may result in a conception of a more reliable product than another with a shorter warranty period.

(Blischke & Prabhakar Murthy, 2006, p. 40) (Murthy & Djamaludin, 2002, p. 234)

1.5.2 Manufacturer’s Viewpoint

Protectional

Besides the buyer’s viewpoint, the role of warranty is also protective for the manufacturer.

Warranty terms or added instructions usually specify the proper use and usage conditions describing how the product needs to be used to avoid errors. Misusing the product may (and often does) affect errors. Warranty terms may describe how to maintain or store the product; for example, whether the product is for outdoor-use or should always be kept in a dry and cool place, or it is necessary to change the oil after every working time. This helps the manufacturer in handling the warranty claims and keeping warranty cases fair for both sides. (Blischke & Prabhakar Murthy, 2006, p. 40) (Ramaswamy, 2002, p. 491) Promotional

From the manufacturer’s viewpoint, warranty also proclaims product reliability. War- ranty is an incentive in product promotion, assuring merchantability to the customer. Usu- ally a long warranty is an effective advertising tool for a product, whereas a product with no warranty at all doesn’t appear quite reliable. However, the promotional aspect of warranty has lost some of its efficiency, because nearly every company claims their products are of high-quality levels, no matter what the truth is. In some cases, companies are not delivering as good a quality as they claim, which has an impact on the promotional aspect of warranty. (Ramaswamy, 2002, p. 490) (Dalgleish, 2006) (Murthy & Djamaludin, 2002, p. 234)

Legislative

The legislative side of warranties widely varies between different countries. The law may require some kind of contractual obligations or warranty policies between the manufacturer or seller and a buyer. (Blischke & Prabhakar Murthy, 2006, p. 263)

Societal

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From societal viewpoint, a civilized society may demand a remedy or some refund from an author which causes a damage to a society’s member (Blischke & Prabhakar Murthy, 2006, p. 41). This is a remarkable side to warranty in order to win the customers’ trust, and to keep the society’s power under control.

1.6 Warranty types and different policies

Warranty types and warranty policies may largely vary between companies, products or even by countries. It’s necessary to understand the difference between warranty types and policies. Several warranty types, and the main warranty policies are specified below.

1.6.1 Implied warranties

Implied warranty is a promise that the product (or service) works like it should. Implied warranties are usually law-based and unwritten, so that the customer can trust the product’s merchantability without any specific document or agreement. Implied warranties do not assure any specific operating life for the product, but normal durability is one side of a product’s implied warranty. There are two types of implied warranties:

1. The implied warranty of merchantability is a warranty type which promises that the product will work like it should and there is nothing wrong with it (for example damage or break).

2. The implied warranty of fitness is a warranty type which promises that the product can be used for its particular purpose when the customer follows the advice and instructions of the manufacturer or seller.

In some cases, the manufacturer may disclaim the implied warranty. If so, the manufacturer must clearly inform the consumer or customer’s company that the manufacturer will not be responsible for any possible malfunctions. (Blischke, et al., 2011, p. 21) (Blischke

& Prabhakar Murthy, 2006, pp. 36-37)

1.6.2 Express warranties

Obviously, besides implied warranties, there is a possibility to give an express warranty for a product. Express warranty is a written promise of a product’s warranty and the warranty terms. This thesis discusses the express warranty policy. (Blischke, et al., 2011, pp.

21-22) (Blischke & Prabhakar Murthy, 2006, pp. 36-37)

1.6.3 Warranty policies

The generalized type of warranty policy is called one-dimensional warranty. One-dimensional warranty policy is defined by a single variable – usually time, age or usage. One- dimensional warranty may be a renewing warranty or non-renewing warranty. These

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types are classified below. (Blischke & Prabhakar Murthy, 2006, p. 42) (Blischke, et al., 2011, pp. 23-24)

Renewing warranties are warranties in which the warranty terms may change during the warranty period, for example, after repairing the failed item, the fixed part may have a totally new warranty period. Renewing warranties offer either a Free-Replacement War- ranty (FRW) or Pro-Rata Warranty (PRW) policy. FRW is a policy, where the manufac- turer either provides a free replacement or free repair for the failed item. Then the fixed or replaced item is provided with a new warranty with identical terms to the original warranty. Under Pro-rata Warranty policy, the manufacturer provides a replacement at pro- rated costs, which depends on age/usage at time of failure – the older the product is, the smaller the refund. (Blischke & Prabhakar Murthy, 2006, p. 42) (Blischke, et al., 2011, pp. 23-24) (Murthy & Djamaludin, 2002, p. 236)

Non-renewing Free-Replacement Warranty policy is a typical warranty policy for most of the products. The idea is, that the seller or manufacturer offers a full and free of charge reparation, or a replacing warranty for the product under the original warranty period, but the warranty expires after the original warranty time (calculated from the original selling or machine startup date) has expired – despite whether the product has been fixed after startup or not. (Blischke, et al., 2011, p. 24)

In non-renewing Pro-rata Warranty (PRW) Policy, the seller or manufacturer refunds some amount of the repair or replacement costs after the breakdown. The amount of the refunded costs depends on time or usage, and is non-increasing expression. (Blischke, et al., 2011, p. 24)

Two-dimensional warranty is defined by a combination of two different dimensions, usu- ally for example time and item usage. Two-dimensional warranty may also be defined by the non-renewing or renewing warranty policy. (Blischke & Prabhakar Murthy, 2006, p.

42) A simple example of the two-dimensional warranty is a car warranty, which can be defined, for example, by the dimensions of age and mileage, whichever comes first.

Warranties can also be classified by the amount of warranty stages. In a one-stage war- ranty, the cost to the manufacturer or buyer doesn’t vary by, for example, the age of the item, but is always the same. In a two-stage warranty there are two different warranty stages determined by the age of item – for example if a product fails during the first year of operating time, the manufacturer may pay 80 percent of costs and the buyer 20%, and if a product fails after one year of operating, it can be divided 50% -50%. In three-stage warranty there are three different stages in dividing the costs. (Blischke & Prabhakar Murthy, 2006, pp. 44-45)

Warranty stages are presented in the figure below:

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Figure 5 - Three stage warranty (Blischke & Prabhakar Murthy, 2006, p. 45)

These proposed warranty policies represent just a few examples on what kinds of warranty policies may occur. Besides these proposed policies, many different kinds of com- binations of these and other policies are also common. Manufacturers have the opportunity to create their own combination to fulfill the protective, promotional and legislative warranty needs the best possible way.

1.7 Reliability and maintaining a product

This section presents product reliability and product maintaining and their connection.

First, the term of reliability is introduced. Then maintaining a product is discussed. Fi- nally, different warranty risks are gone through.

1.7.1 Reliability

The reliability of a product means the product’s ability to perform its required function under given conditions. Reliability concerns the product warranty and furthermore product quality, and reliability failure represents quality failure at the same time. (Prabhakar Murthy & Jack, 2014, pp. 35-36)

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Figure 6 - Reliability curve (Prabhakar Murthy & Jack, 2014, p. 34)

As shown in the figure above, product reliability typically decreases with age, and a new product’s reliability should be ideal 1 (or 100 %). Further on in this thesis this curve will be compared to the case company’s warranty claim amounts by time. If a component’s reliability is sufficiently known, it can be linked to the whole product’s reliability. How- ever, in this thesis case the production volumes are too low, and the product variety too high in order to gain information through these kinds of calculations. (Prabhakar Murthy

& Jack, 2014, pp. 35-36)

Product reliability can be divided into four segments, which are design reliability, inher- ent reliability, reliability at sale and field reliability. All of these are presented below.

(Prabhakar Murthy & Jack, 2014, pp. 35-36)

Design reliability is produced on the design table, where all of the significant choices about a product’s ability to work are done. Design decisions mostly define a product’s best possible reliability, and design quality requires resources and proficiency. (Prabhakar Murthy & Jack, 2014, pp. 35-36)

The inherent reliability of standard products that are manufactured in volume, may vary from the designed, because of assembly work variation or component non-conformance.

Even the most complicated project-designed products usually have some volume-produced components which may affect their reliability. (Prabhakar Murthy & Jack, 2014, pp. 35-36)

Reliability at sale depends on the transportation and storage time, and the conditions prior delivering the product to the end-user. Mechanical load during transport may cause leaks to hydraulic couplings and hoses, and for example rainwater or dust might affect the operation of the electrical components, and even break them. (Prabhakar Murthy & Jack, 2014, pp. 35-36)

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Field reliability is predicated by the environment, operational factors, operator (user) and the usage mode of the product. To exemplify, taxi cars can be well-maintained and wisely operated (always a warm motor and long distances to drive), therefore they can be in a better condition than others much less driven and younger cars of average consumers.

(Prabhakar Murthy & Jack, 2014, pp. 35-36)

1.7.2 Maintaining a product

Maintaining a product is important for product reliability. Usually product maintaining is defined in the warranty terms or the appendix, and it has to be properly performed to fulfill the warranty terms and keep the warranty valid. Product maintenance is divided into two segments: preventive and corrective, which are presented below. (Prabhakar Murthy & Jack, 2014, pp. 37-39)

Preventive maintenance is defined as preventive actions to control a product’s wear and tear, and the overhaul of a product so that it won’t break. Preventive maintenance includes maintenance in its entirety, tests and measurements which are performed to prevent failures from occurring. Preventive maintenance reduces the likelihood of failure, which makes preventive maintenance vital in order to meet the presumed product quality level and warranty costs – especially in relation to products where the machines’ operating lifetime is long, and overhauling is needed. (Prabhakar Murthy & Jack, 2014, pp. 37-39) Corrective maintenance includes actions the purpose of which is to restore the failed sys- tem or product back into working state, and making sure that the known failures are the only ones, and the system won’t fail right after the restorative work. (Djamaludin &

Murthy, 2000, pp. 91-92) (Prabhakar Murthy & Jack, 2014, pp. 37-39) (Blischke &

Prabhakar Murthy, 2006, p. 168)

1.7.3 Warranty risks

Offering a warranty for a product involves risks, which should be observed while making the warranty decisions for a product. (LeBlanc, 2008) The following noticeable risks should be recognized:

1. Product quality is worse than expected

Offering a warranty for a product that fails more than expected causes financial losses for the business. A faulty prediction about product quality level causes similar effects to a business as a wrong estimation of repairing costs.

2. Product quality is better than expected

If a warranty is offered for a bigger amount of expected failures than actual, it generates a higher profit for the business, and the business benefits of it (LeBlanc, 2008, p.

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1). Thus when product quality is higher than expected, it would be wise to rethink the product warranty, and perform some recalculations. Perhaps the granted warranty period could be even longer in the future, in order to benefit of all the positive features of good quality.

3. Not offering a warranty although competitors do offer one

The decision not to offer a warranty although competitors do, may give a competitive advantage to the competitors, which may be decisive for the customers when making a choice. (LeBlanc, 2008, p. 1)

4. Offering a warranty without capability to handle warranty cases

Offering a warranty requires an infrastructure to handle warranty cases. (LeBlanc, 2008, p. 1) The warranty process flow has to be smooth for the customer, so that the customer’s process is interrupted with minimum possible loss. Offering a warranty without adequate capability to handle the possible warranty cases poses a risk for customer satisfaction and a company’s reputation.

5. Offering a warranty with overestimated warranty costs

Overestimating the warranty costs causes several problems for accounting and bid pricing. Product margin calculations could be totally out of scale, which causes competitive disadvantage. (LeBlanc, 2008, p. 1) Understanding the real costs of a warranty program helps to achieve business objectives.

6. Offering a warranty with under-estimated warranty costs

While overestimating the warranty costs causes too high unit bid price, under-estimat- ing the warranty costs will also cause discrepancy to the calculations. In that case, actual warranty costs may rise too high, which affects the product margin and business profitability. Making decisions about product pricing can be very harmful to the business, if the cost data is inaccurate or completely erroneous.

7. Other risks or uncertainties

The amount of warranty claims may be largely different than the number of actual breakups. The amount of warranty claims can be larger or smaller than actual, because every breakdown case doesn’t produce a warranty claim, and some warranty claims are actually issued without a real breakdown-under-warranty. Invalid claims occur outside of the warranty period, or from products which haven’t failed at all, or failure is caused by misuse of the product or lacking maintenance. However, a warranty claim issued outside of the warranty period still offers useful information on product reliability, especially if the claimed defect otherwise fits into the warranty terms. (LeBlanc, 2008, p. 2) (Blischke

& Prabhakar Murthy, 2006, p. 83)

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Besides these various risks, assessing a novel product’s reliability is difficult because of the lack of information and user feedbacks. (Blischke, et al., 2011, p. 8) This increases the effect of all of the six risk types presented above. Similar results may occur if the warranty data is not well utilized; therefore even the highest amount of data can be nearly useless, if the data quality is poor or data handling is insufficient. This is one reason why this thesis is made.

1.8 Warranty Data

Reports from the warranty cases constitute the warranty data. Warranty data permits the analysis of the warranty cases, and the creation of more useful and informative warranty information from the entered warranty reports. It can be used to improve product quality and reliability through having knowledge on breakdowns, and for making a root cause analysis, and planning corrective actions for the main quality problems. Usually warranty data is quite fuzzy, and it is not easy to give a profound analysis on the current state of warranty claims, which may affect the quality of warranty analysis. (Blischke &

Prabhakar Murthy, 2006, pp. 132-133)

The warranty data collection and warranty analysis process is described in the following figure:

Figure 7 - Warranty data flow and use (Blischke, et al., 2011, p. 11)

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Warranty data collection consists of a combination of warranty claims data and supplementary data. Warranty claims data alone does not allow the creation of a proper analysis, but supplementary data, for example sales volumes, production volumes and design modifications, has to be included. This is predicated on the product portfolio.

Warranty data is divided into the three following classes (Blischke, et al., 2011, p. 10):

 Product related: which component is broken, the failure type, age and usage as brake-down occurred

 Customer related: operating mode and usage, environment, maintenance, user

 Service agent related: fixing costs including the repair work, replacements, parts, possible refunds, transportation and freight, serviceman travelling costs

Besides these three classes, data can be, for example, compared to a competitor’s products and their break-downs, warranty cases and warranty costs. Unfortunately, comparison can be quite difficult, because warranty data is usually considered a major trade secret, and the selections behind the numbers given are often unclear for the comparator. (Blischke, et al., 2011, p. 10) (Blischke & Murthy, 2000, p. 41) For example, a company may include sales margin in the spare part prices used in warranty repair reports, while another company doesn’t.

Warranty claim data represents a collection of some measurable features from the cases, such as component usage rate, failure mode or failure times, or the failed part’s name and pictures. (Blischke, et al., 2011, pp. 61-63) This data may enable making a proper analysis, but it’s not always assured. Usually the data is unstructured, which requires actions for making conclusions, and corrective actions for the current state. This problem is pre- sent also in this thesis.

Warranty Claims data analysis is based on the warranty claims data collected during the warranty process after product breakdown. The quantity of this data and its quality depends on the person who has performed the input, as well as on the company’s warranty process and the warranty report form. All of these factors should be on a necessary level to extract the wanted information out of the input data. (Blischke & Prabhakar Murthy, 2006, p. 132) (Blischke, et al., 2011, pp. 10-11)

1.8.1 Failure causes

Classifying the different failure causes may aid in understanding failures, and in producing better information on the warranty data. According to (Blischke, et al., 2011, p. 37), failures can be categorized into six classes based on the failure causes:

 Design Failure

 Weakness failure

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 Manufacturing failure

 Aging failure

 Misuse failure

 Mishandling failure

The classification may vary from the above list according to the product and failure char- acteristics.

Classification is not always well-defined, and several failure causes can be sorted into multiple classes, for example, misuse failure can occur when a design failure compels the user to misuse the product.

1.8.2 Warranty Data Analysis objectives, possibilities and threats

Warranty data analysis carries several objectives: it may help obtain useful information on product quality and reliability through the warranty cases. This helps not only in improving the current products during the product life cycle, but also in developing better new product models in the future. (Blischke, et al., 2011, p. 10). Every well-filled warranty report should be seen as a positive document, which gives information on occurred errors, granting a chance to fix the current problem and compensate the loss for the customer. Warranty data also enables applying corrective actions to the production process to avoid similar mistakes in the future. Warranty data gives an opportunity to develop better products, and to manage the product quality level and costs of non-quality, which allows a company to outperform in future. (Blischke, et al., 2011, p. 9) These possibilities should always be used in the required way, and ignoring the warranty cases and not utilizing the information in product improvement actions, may debilitate a company’s competitiveness in the long run. (Blischke & Prabhakar Murthy, 2006, p. 133)

However, data quality can be a big problem while analyzing the warranty data. Warranty reports are mainly produced by non-independent authors, who usually have economical or other incentives, which may affect the data quality. Wrongly produced data may guide corrective actions into the wrong direction, which may cause loss of money and other resources, or cause burying the relevant focus areas under the unwanted and secondary ones. Data may represent the inputter’s intentions, which may turn the actions unfair.

These matters should be evaluated while constructing the warranty reporting process and warranty system, and if possible, the neutral and trustworthy input of the warranty data should be ensured. (Blischke & Prabhakar Murthy, 2006, p. 132)

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1.9 Warranty process and costs of warranty

The overall warranty process includes two sub-processes; one for the claim process and the other for the customer service process. Both of the sub-processes are important for the proper handling of warranty cases. (Blischke, et al., 2011, pp. 63-64) In some cases, the customer service process is separated from the warranty claim process, in order that the product won’t be waiting for reparation simultaneously, causing a big loss for the customer’s process. Customer service process has to be smooth and quick, so that after the possible break-down the customer may continue using the product with the least possible loss. This emphasizes industrial applications, where the product has a major role in productivity, and quality loss will immediately cause multifold losses for the company.

Main factors for the warranty process are pointed out in the figure 8 below. (Blischke, et al., 2011, pp. 63-64)

Figure 8 - Warranty Process Elements (Blischke, et al., 2011, p. 64)

As shown in figure 8, product failure inflicts the warranty claim execution, if the product has failed under warranty terms. The overall warranty process will always be based on these six elements.

1.9.1 Warranty Execution

As pointed out in the figure above, product failure usually inflicts warranty execution with the warranty claim. This is usually a wanted situation when a product unfortunately fails under the warranty period. Warranty permits the fixing of the customer’s problem, and the learning from the case for future actions to improve quality level. Warranty reporting forms vary between companies.

There are several reasons for why warranty claims won’t always ensue after failure under warranty. The customer may:

1. Be discontented with the product and its manufacturer 2. Not be satisfied with the provided warranty service 3. Feel that making the warranty claim is not worthwhile

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4. Be unaware about the product’s warranty (Blischke, et al., 2011, p. 64)

It is an unwanted situation, if customers do not make warranty claims after a break-down:

without warranty claims it’s very difficult to evaluate and improve product quality. War- ranty claim data offers primary information for the improvement of product design and quality (especially during the product life-cycle), and a warranty claim gives a manufacturer a chance to fix a fault and improve customer satisfaction. It’s very necessary to have the opportunity to reconcile the possible open warranty cases. Therefore it’s also important that customers or service will execute the warranty report right after the issue to inform the manufacturer about the case, and to keep warranty handling lead-time short.

Delay in executing the report may harm and cause delay in the root cause analysis and the corrective actions.

1.9.2 Warranty costs

Offering a warranty always results in warranty costs – whether there are any warranty cases or not. Even the warranty system and the generation of the warranty terms need resources and incur costs, but actual warranty cases resolving, costs compensating and repair work may multiply the costs. Usually, warranty costs can be divided into direct and indirect warranty costs. Direct costs are easier to evaluate, just like the other quality costs which were discussed in the previous chapter. Product warranty causes additional costs to the manufacturer. Both warranty legislation and the warranties offered by competitors affect a product’s warranty terms and therefore the amount of the warranty costs. How- ever, product quality (and reliability) is the main factor affecting the total sum of warranty costs. User instructions and - environment also have an impact on the warranty case amounts, because misusing the product may cause breakdown. (Blischke, et al., 2011, p.

8) (Blischke, et al., 2011, p. 29) (Blischke & Prabhakar Murthy, 2006, pp. 139-143) The following represents the clearest type of warranty cost: if the product fails under warranty, it causes direct warranty costs to the manufacturer. These costs stand for external failure costs of poor quality and direct warranty costs. These direct warranty costs consist of fixing or replacing a product, freight, handling the claim and of course the structure of the warranty policy. After this “tip of the iceberg”, indirect costs will appear.

All of these costs are usually quite random and unpredictable. The simplest way to reduce all warranty costs is to decrease the direct warranty costs by improving the quality level and product reliability. Likewise, the indirect and unknown warranty costs will decrease by time. (Blischke, et al., 2011, p. 8) (Blischke, et al., 2011, p. 29) (Blischke & Prabhakar Murthy, 2006, pp. 139-143)

One big question on product warranty and warranty costs is how to add warranty costs to the product price, or how to estimate all of the warranty costs and their effect on the company’s profit and loss accounting. Information on different companies’ warranty costs is hard to find, but typically the total warranty costs are around 2-10 % of the sale

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price. For example, auto manufacturing companies spend around 2.5-3% of their sales revenue for repairing vehicles under warranty, and other manufacturing companies do not seem to vary from that percentage a lot. This amount of costs has to be taken into account in decision-making. Besides that, as discussed in the total quality costs above, the hidden failure costs elevate the total costs to a whole new level. (Sureka, et al., 2008, p. 621) (Blischke, et al., 2011, p. 8)

The direct warranty costs allocation affects product price setting and the margin. War- ranty costs can be included into the product price fully, partly or not at all, and calculating this may be difficult. Maybe the most important matter is to fully understand what the warranty costs consist of and how the warranty costs affect the unit price and profitability.

Direct warranty costs are still quite simple to calculate, but indirect warranty costs – for example the costs of implementing a warranty system – may be hard to evaluate.

(LeBlanc, 2008)

Different factors affecting the direct warranty costs are represented in the figure below.

Every single factor can be managed on some level to reduce the total warranty costs and to increase product quality and to improve customer satisfaction. Advancing stricter warranty terms or a shorter warranty period will reduce the absolute warranty costs, but may indeed raise the total costs of non-quality, while customer satisfaction decreases.

Figure 9 - Factors influencing warranty costs (Blischke, et al., 2011, p. 9)

Warranty costs can be counted from the manufacturer’s viewpoint or buyer’s viewpoint, which makes a difference to the numbers. Concerning a reparable product and non-renewing FRW policy, the expected cost to the manufacturer is the repairing cost. The direct cost for the customer should be zero euros, but also unfortunate indirect costs will arise if the customer’s operating process stops due to the failure. This usually happens when the customer is a company, and in these cases the total costs of a breakdown may be multiple times the reported and refunded ones. (Blischke & Prabhakar Murthy, 2006, pp.

149-150)

Quantifying the warranty costs is important, and quality costs may indicate the company’s economic health. (Miguel & Pontel, 2004, p. 309) External quality costs have a strong

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connection to warranty costs; in some cases they are the same. This depends on the company’s business and allocating methods.

1.9.3 Warranty costs allocation

Warranty costs accounting can be divided into external and internal accounting. To fill the requirements of financial reporting, the external allocation of warranty costs has to be made according to the valid accounting legislation. Internal warranty costs allocation has a much wider scope, and it can be applied to a company’s needs, what is discussed below.

(Blischke & Prabhakar Murthy, 2006, p. 256)

Allocating the warranty costs is a major factor while reporting warranty costs. Cost management requires warranty information for decision-making. Warranty costs should be allocated in a fair way to make sure that warranty decisions and product quality improvements are properly directed. The specific allocating method depends on, for example, the product portfolio, total warranty case amounts and warranty case amounts by different products. (Blischke & Prabhakar Murthy, 2006, p. 256) (Oumlil, 2013, p. 166)

If product models can be divided into explicit groups (like product groups), allocating the warranty costs by product group may be a sufficiently well-aimed method to use.

The listed possible failure causes represent one classification for warranty costs, or warranty costs can be categorized and allocated the same way a company uses for categorizing the other quality costs. (Oumlil, 2013, p. 166)

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2 METSO QUALITY AND WARRANTY MANAGE- MENT

This section presents Metso Minerals Factory 3 factory’s quality and warranty management actions. First, it defines engineering and designing quality and their role for product quality. After that, it describes quality costs. Finally, it discusses the Metso warranty process and warranty handling.

Several main figures and information needed to be hidden from this public thesis version.

2.1 Quality management

Metso Minerals factory’s total quality consists of three different main factors which are presented below. Actual quality is a compound of these factors.

2.1.1 Engineering and design quality

The ability to produce high-quality crushers and mobile screens is enabled on the design table. A product’s best possible quality can’t be much better than its designed quality, and designing a high-technology product requires a wide competence in order to design products applicable for usage. Design errors may make it impossible to manufacture mer- chantable items. Engineering has to co-operate with all other departments – sale, purchas- ing, logistics, quality management, the assembly workshop and manufacturing, to allow a company to produce high-quality lokotracks and crushers. Customers cannot be ignored either, because they usually possess a good knowhow on the machines’ pros and cons.

Design modifications or improvement requests and other interactions with quality, assembly compartment and the suppliers, are important for engineering to continuously improve the drawings and assembly instructions for better quality and shorter lead-time. In addition to these internal requests, warranty reports from the customers and dealers also give information about product failures and quality issues, which should be evaluated in the engineering department for a possible need of design improvement. By current process, if an engineering change request is needed after a warranty report, the warranty report should produce a separate engineering change request (ECR) report to the system.

Different kinds of feedbacks need significant resources to be evaluated and corrective actions to be executed. Several warranty claims and engineering change requests will be generated every year, and in this case these reports are the main channel through which to improve product quality. Some of the requests are critical and need to be evaluated and

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fixed without a remarkable lag, and some of the requests are not-so-critical, and won’t directly affect the product’s quality level or customer satisfaction.

2.1.2 Supplier quality

Metso can improve the suppliers’ ability to produce quality with its own actions. At first, choosing the right suppliers, who have the ability to fulfill the needed quality levels, is an important factor that Metso can affect. Different suppliers’ manufacturing ability may vary a lot. In addition, good manufacturing drawings and technical support during the manufacturing process allow the suppliers to produce good quality. Even the best supplier is not able to produce superior parts, if the drawings are incorrect or technical advice is lacking or faulty. Most of the parts are manufactured by a different party than where the assembly will be made, so fixing or adjusting the parts while assembling them together is not the right way to operate; instead, manufacturing the parts originally with a good quality level without the need of fixing them is.

Suppliers’ quality management is based on two main aspects: preventive measuring at the suppliers’ workshops, and quality notifications from the workshop’s assembly work. Pre- ventive measuring and technical support is mainly managed by Metso’s suppliers’ quality management team, which visits at the supplier’s workplace, inspects the suppliers’ quality, and evaluates the used working methods, and aids the manufacturing process as needed. Deterrent work is the utmost method to reduce problems with quality.

In addition, the suppliers’ quality-related warranty cases cause a quality notification to the supplier. Quality notifications include information on the reported error, claimed costs and a 5D report that the supplier fills up. The 5D report includes five steps:

1. Supplier’s responsible team replying to the quality notification 2. Error description

3. Immediate measures at the supplier and customer 4. Reasons and root cause analysis for the error

5. Planned corrective actions to prevent similar quality issues in future

Quality notification is a standard reporting tool, which includes all of the supplier-based quality issues and the suppliers’ 5D responses. Quality notification is an effective tool for reporting a found quality issue and improving the suppliers’ quality level and decreasing report costs.

The test drive is one of the main points in controlling product quality, and finding errors before delivering a product to customer. The test drive actions performed by suppliers are controlled by Metso. All modules manufactured by suppliers are tested by a test drive protocol before sending them to the Metso workshop for final assembly. Crushers, power units, conveyor modules, feeder modules, screen modules and other separate modules are