What is the key difference between Warranty and Recall?

The difference between Want and Need is Self-Control: Unknown

Introduction

What is the difference between Married and Happily Married! Married means you are still struggling with your partner and have not yet accepted the fact that No two individuals are the same. Happily Married means you have understood each other’s strength & weakness and are helping each other to balance the gaps.  

Objective

The automotive sector is getting competitive with every passing year. With the advent of software and electronics, the complexities in a vehicle have multifold. Earlier the failure was predictable and controllable. But with changing times and an interconnected global economy, the impact of the failure has crossed the boundaries of a country and wipe out the existence of an organization, if not managed effectively.

Warranty and Recall are two such failures that have become a part and parcel in the automotive industry. By understanding their meaning and key differences, the organizations can effectively acknowledge its meaning, implication and how much it is important for the satisfaction of the relevant stakeholders, especially the end-user.

Definitions

Warranty: A warranty is a type of guarantee that a manufacturer or similar party makes regarding the condition of its product. It also refers to the terms and situations in which repairs or exchanges will be made if the product does not function as originally described or intended.

No Trouble Found (NTF): Designation applied to a part replaced during a service event, that when analysed by the vehicle or parts manufacturer, meets all the requirements of a “good part” (also referred to as “No Fault Found” or “Trouble Not Found”)

Recall: A product recall is a request from a manufacturer to return a product after the discovery of safety issues or product defects that might endanger the consumer or put the maker/seller at risk of legal action.

 

Detailed Information

Given the high volume of the manufacturing, the complexity of the product and the harsh operating environment under which automobile is used, it is inevitable that there will be component failures! While there are lessons to be learnt from these failures as generally, we presume that these failures are occurring due to unassignable causes. But it is important to understand that there could be an indication for a systemic failure of the component.   

The advent of a large amount of software/electronics/hardware integrations significantly increases the complexity of the function and problem-solving. Many of these integrations result in increased safety risk and therefore greater emphasis is needed in the effective product development process and field monitoring of performance. Additional emphasis on data analytics is necessary as the amount of information available has increased. More initial problem identification will need to be done with the analysis of the data then requesting parts to validate the information. 

Criteria of Recall/Warranty:

  1. Criticality of the risk
  2. Fitment / Function/ Aesthetic
  3. Government policies like Emission

Major Areas of Failure:

  • Software
  • Electronics
  • Fitment
  • Function

Possible Reason for Failure:

  • 4M (Man, Machine, Material Method) Change
  • Product Design process
  • Product Validation process especially in an abusive condition
  • Tier 2 Supplier’s maturity level
  • Excessive use of causal workers

Impact of Failure:

  • Brand name and corporate image
  • Reputation
  • Liability
  • Cost of Poor Quality (COPQ)
  • Business growth

What to do:

  • Mock drill of the recall process
  • Review SOP (Standard Operating Procedure) of other industries (Pharma sector)
  • See the opportunity in the warranty/Recall and improve
  • Take voluntary action and enhance the brand value

IATF 16949 Standard Reference:

  • 1.2.1: Risk Analysis
  • 4.2.4: Supplier Monitoring
  • 5.5: Post Delivery Activities
  • 1.2.1: Customer Satisfaction
  • 3.2.1: Management Review
  • 2.5: Warranty Management system

Following are some of the key Difference between Warranty and Recall:

S.No. Warranty Recall
1 Any defect observed on the Product by the end-user while in use. A few pieces will be rejected back from end-user to OEM and its supply chain The rejected volume can be in hundreds, Thousands or Millions depending upon the criticality of the defect
2 A defect impacting (fitment, Function, visual) only a small population of user and no risk to legal or safety requirement A defect impacting risk to functional, legal or safety requirement which can impact a wider population of user
3 The defective part is returned to the OEM (supplier) through an authorised dealer and is replaced without cost The OEM announces a Recall and the defective parts are returned to the OEM (replaced at their service centre) either voluntarily or as per compliance with the legal requirements
4 The warranty has specified terms and condition like number of years or its usage like number of kilometers travelled The Recall has no specific timeframe and is applicable throughout the active life of the vehicle
5 The warranty requires a detailed analysis and action plan related to the rejected product to avoid a similar problem in further production The recall has a much wider scope of analyzing the problem and taking action at the OEM and its supply chain. It may also involve legal bodies.
6 The warranty result in the financial loss related to the product replaced Recalls are costly, Costs include having to handle the recalled product, replacing it and possibly being held financially responsible for the consequences of the recalled product.
7 Example: Tyres, Shockers, Display panel, Music System, Filter system Example: Airbag (Takata), VW Emission Norms

Present Challenges

  1. How often Recall of the vehicles happens with the knowledge and awareness of all relevant stakeholders?
  2. In developing countries, how often the Recall is voluntary and not forced by the relevant authorities?
  3. How often recall and warranty are considered an opportunity to unlearn and learn?

References:

IATF 16949: 2016

CQI -14 Automotive Warranty Management Guideline

Industry Experts

 

This is the 114th article of this Quality Management series. Every weekend, you will find useful information that will make your Management System journey Productive. Please share it with your colleagues too.

Your genuine feedback and response are extremely valuable. Please suggest topics for the coming weeks.

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Raj
Raj
1 year ago

It is a very good learnjng, good example helped us to understand better