Missing the deadline to process warranty claims means automatic approval and money lost—and Marel had missed the deadline for 13 of the last 18 months.
Marel, a leading food processing equipment manufacturer, had been missing their customer-promised 60-day timeline in 13 of the last 18 months. When they exceed the 60-day limit, the claim is automatically approved and slated to be paid.
Historically, only three out of four of these claims would have been approved due to the age of the equipment or mishandling by the customer. In order to avoid unnecessary payouts, the warranty claim process has to provide a timely reply on claim validity. In order to be considered valid, equipment has to be within its first 12 months of ownership, properly maintained and correctly operated.
Magnús Ívar Guðfinnsson is Marel’s Global Service Excellence Manager and the process owner for quality, warranty, service and customer experience processes. He decided to tackle the warranty claims problem by turning it into a Lean Six Sigma project. Magnús was surprised to see the large gap between the process performance and the goal.
The global process was implemented in January 2017, so it is a relatively new process. The employees on the Global Warranty Team (GWT) were not aware of the performance issues but once informed they were immediately onboard with the need for change.
A bigger challenge was getting buy-in from other process participants, such as Warehousing, Receiving, Quality, Product Specialists and Engineering. Warranty claims processing was not a high priority for these groups.
Magnús and the team conducted a Process (Gemba) Walk in three separate locations to gain deeper insight on the time gap. They documented wastes using the 8 Wastes Check Sheet and identified improvement opportunities during the walk. As the team interviewed process participants, they learned how the process truly worked and were surprised at the variation across the different company locations.
The most common wastes they saw were Extra Processing, Defects in recording information, and Waiting for information. In terms of Non-Utilized Talent, the team noted confusion among the staff regarding their individual responsibilities.
However, the biggest “aha” occurred during the 5 Whys segment of an improvement workshop with key process participants. As they dug deeper it dawned on the group how little the GWT communicated with other colleagues in the process.
The GWT assumed other process participants knew how to work within the process and operate the IT system—but that wasn’t the case. Magnús recalls, “When this process was implemented, the focus was on the technical side, not the no-less-important ‘soft’ issues like communications and training.” This highlighted for the team how critical communications, training and Continuous Improvement are for the long-term success of the process.
As a result of the workshop, the group developed targeted solutions:
- Clarified the roles and responsibilities of the functions involved
- Created Standard Work and Visual Management to communicate the procedures and expectations
- Trained all colleagues on the end-to-end process, including the IT system
- Empowered staff to take action and avoid waiting on decisions and approvals
As a result of these improvements the average cycle time for warranty claims with returned parts went from 68 days to 43 days—a 37% improvement. Warranty claims without returned parts went from 13 days to 5 days—a 62% improvement. The project cut cycle time and bolstered the effectiveness of determining claim validity. As a result, the customer now enjoys a quicker, more professional experience when filing a claim.
The project helped Marel realize $240k in annual warranty costs savings. The tighter process required one less person to process claims resulting in $50K annual savings and the ability for the employee to redeploy and focus on adding value for the customers.
Leadership was surprised at the waste the team uncovered in this relatively new process. They were impressed by the team’s approach and the positive results. Magnús notes, “The process participants were thrilled to witness this improvement, everyone wants to work to the best of their abilities—that sure applied here.”
Magnús expects to capitalize on this project with further improvements as well as apply the learnings to other projects across the company. “It is very fulfilling to tap into and engage colleague’s know-how and competence in reaching new plateaus in organizational performance for the good of the company and the customer.”
Magnús Ívar Guðfinnsson is the Global Service Excellence Manager for Marel, a leading food processing equipment manufacturing company. In addition to being process owner for service processes, he manages quality, warranty and customer experience processes.
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