Back many years ago when I first started out in the business as a warranty administrator, I came across the warranty parts return area for the first time while my predecessor was teaching me warranty.
To say the least I was a little surprised at the condition of the area but being new at the game I just thought that’s the way it was done. Parts were piled all over the place. Two sets of bins facing each other were being used for two different manufacturers – Toyota on the left, Nissan on the right. It seemed the floor was a catch all for anything that didn’t or couldn’t make it into the bins.
After adjusting to the new job a few months and reading everything that I could about warranty administration I realized the warranty parts return area we had wasn’t up to standards. Although the parts department was supposed to take care of it, it was obvious it was something they didn’t want to deal with.
The area was buried in the most inaccessible place in the parts department, a place where management rarely went by and that’s how it was allowed to become the disaster that it was. The parts counterpeople would stand at the far end of the parts bins that were in front of the parts return area and just throw the parts from about twenty feet into a pile that over time built up.
I took some time to try and help unbury the mess. Any free time I had was spent back in “the hole.” It only took a few months before it was back in the same mess that it originally was.
Fast forward a few years. A few parts debits started coming across the claim payment reports. I went back to “the hole” to see what was going on and it looked as bad as when I last left saw it a few years ago. I wasn’t going to visit because I knew I would get frustrated at the sight but the parts debits sent me back there.
Now I took even more time to unbury the mess that the parts department built up. It wasn’t uncommon to find parts that had been there more than a year. The new parts just piled up on the old ones and no one ever bothered to dig too deep to clean it out.
After spending the time to clean out the old stuff, I looked into what should have been there and to my surprise, only about twenty percent of the parts that should have been there, were there. After a while if an old warranty part wasn’t returned to the counter, no one seemed to care and the problem was ignored.
Now to the second dealership I worked at where the warranty parts return process was the polar opposite of the first.
We did it right from start to finish.
First step in the parts return process was making sure parts did get returned by use of a parts return stamp. When a technician brought the parts to the counter after a warranty repair, the counterperson stamped the back of the hard copy.
When the claim came in to be processed, I would make sure the stamp was there and send it back out to the service advisor if it didn’t.
It didn’t stop there. Once each new claim payment report came in, I’d highlight the RO numbers of the claims for the parts that could be trashed. If only some repair lines of RO were paid, it was noted which parts could be disposed of. So the list didn’t get lost, I held onto it until the date we could scrap the parts (GM is 15 days past the date of payment) and then gave it to the parts department.
If a parts return request came in, either it was handed off directly to the parts department or came through me and I went to the parts department with it. We kept the documentation when the parts were returned so we always had a record of it being sent.
It wasn’t luck that a process was in place at the second dealership, it was good planning and it takes good planning to do it right and avoid the chargebacks that can happen with a poorly handled warranty parts return process.
What practices should you put into place for your warranty parts return program?
1. Knowledge – Everyone needs to know the ins and outs of what the manufacturer requires. That includes the retention period, what needs to be held and what happens if the part isn’t sent in on time.
2. Shared Control – Both the parts department and service department should work together to put a good process in place. One person from the service department (usually the warranty administrator) and one from the parts department (preferably the person who will scrap parts and send out the returns) should work together to keep things in order and share information so it runs smoothly.
3. Tracking at the counter – Once parts return debits start happening or parts that need to be returned turn up lost, the finger pointing between service and parts usually starts. That’s why a good procedure to make sure parts are returned can help determine weak links in the system. The parts counterperson should sign off on the repair order saying that they received all the old parts related to the warranty repair. If a claim comes across the warranty administrator’s desk that isn’t signed off, it should be returned to the technician to return the parts. That will at least give you some ability to track part returns and make sure they’re available if needed.
4. Timely parts scrapping – A messy return area can easily slow down the return of parts to the factory when they’re requested so it’s important to keep it clean. The only way to keep it clean is to do scrapping as often as possible. That requires an exchange of information between the parts department and the warranty administrator so the parts department knows which parts can be scrapped and which can’t.
5. Tracking parts returns – When a part return request is received, it’s an absolute must to make sure the parts get sent out as well as a way to track them. GM uses UPS for parts returns and so do some other manufacturers but even if your manufacturer uses another company for parts returns, a package tracking number is available so you can check the disposition of the package at any time as well as know who signs for it. For the most part, you won’t need it but when you get debited for a part that was returned, it can be a lifesaver.
Take a look at the last six months of claim payment reports. Have you had any debits? How many and how much has it cost you? If you’ve had even one debit and wasn’t able to get the debit reversed, you do need to look at your processes and make some changes. Use the list and examples above to fill in the gaps where your money can slowly be leaking away.
