1. CHAPTER#19 PRODUCT WARRANTIES AND LIABILITIES Lecture No. 16Course: Engineering Management MED DEPARTMENT, U.E.T TAXILA COURSE INSTRUCTOR : PROF. DR. SHAHAB KHUSHNOOD

2. Warranties Warranties Primary Obligations Replace the defective product Replace the faulty components in the product Make payments for the service labor to rectify defective components Make payments for the replacement of defective parts and the installation

3. b) Reasons For The Warranty Needs It makes the producer of the product responsible for rectifying faults in the product It helps in prompt acceptance of the produced product It helps to enhance the manufactured product marketability It encourages better monitoring of the performance of the product It helps to expedite payment from the customer for the sold product It encourages the manufacturer to produce better product

4. c) Variation in Warranty Practices For Export Products The companies have cited the following reasons for developing different terms The product warranty duration period may depend on factors such as service quality, reliability and maintenance availability in local environments. Availability of information on the usage of product may be in the foreign market Different legal jurisdictions of the outside countries may demand changes in the warranty terms

5. Warranty Management Firms may assign responsibility for warranty administration to Customer service or sales unit when the claims are relatively simple and their number is low Product service or technical service function when the claims require a certain technical knowledge to process A sole separate warranty administration unit when the cost or number of claims is high

6. Trends in Warranty Claims Fifty-one percent of the companies reported that there was no change in the number of warranty related requests Thirty-eight percent of the manufacturers agreed that the requests had increased Only eleven percent of the participating organizations indicated that warranty repair requests had decreased

7. Trends in Warranty Claims (Cont.…) The following are the common reasons given for the growth in warranty claims Product misuse by the customer Inflationary pressures Deterioration on the quality of manufactured products More complex and service-sensitive products

8. Trends in Warranty Claims (Cont.…) The manufacturer service executives forecasted the following warranty problems in the future Government regulations Rapid increase in the cost of material, labor, etc Increasing trend in user expectations Warranty starting dates records-keeping Rising litigation activity Rising product liability Shortage of qualified product service manpower

9. Reliability Improvement Warranty Components Of A Warranty

10. Factors Concerning Warranty Elements The factors which must be considered by the buyer when specifying elements of warranty are Product producibility Product line Product line planned longevity Maturity with manufacturer Technical support capability of the manufacturer Overall support availability of the manufacturer

11. Manufacturer’s Reliability Improvement Warranty Risks Sudden increase in the inflation rate Covering a high technology product Unforeseen operational stresses under which the manufactured product has to function Product exposure to failure will increase due to increase in its usage Due to maintenance manpower, product mishandling or tampering may induce failures

12. Criteria For selecting equipment For Warranty Coverage Ready transportability of the equipment Self-containability of the equipment Field-testability of the product Initial support cost of the product is moderate to high

13. Incentives Of Warranty To Both Manufacturer And Customer The primary incentives to manufacturer and user are as follows Manufacturer: Improvement in changes for more business in the future Expanded market for the product Improvement in changes for repeat business Cost controls establishment through design, production and field support

14. Incentives Of Warranty To Both Manufacturer And Customer (Cont…) User: Decreased risk Low initial and operational costs mean better cost versus profit ratio Calculate risk State-of-the-art advancement: reliability, maintainability, accuracy, operation and function

15. Warranty Cost Model A model to estimate contractor warranty cost, as follows where

16. Product For Liabilities Causes For Liability: Failure to keep suitable records of user complaints and product failure Design defect in the manufactured product Due to inadequate testing and quality control, the product has manufacturing defects The packaged product is prone to handling and safety-related damage

17. Areas Examined in Building A Product Liability Suit Incorrectness of the product safety procedure Test procedures Inadequacy in design Faults in design False claims made in product advertisements

18. Defenses Used Against Consumers By The Suppliers