Warranty Management Excellence: Return Rate Metrics and Measuring Performance

STUDY OVERVIEW

Challenged with evaluating different measurements of manufactured products in order to improve warranty management and increase customer satisfaction, companies gather return-rate metrics to assess performance and reporting. This study presents return-rate metrics for a series of product families to determine best practices for product quality evaluation and warranty performance across industries. Furthermore, the research provides additional ways of measuring warranty management performance, breaks down how customers satisfaction is used to evaluate performance and showcases key company objectives driving the management process. Manufacturing Executives can use this study to compare their return-rate levels, customer interaction strategies and performance measurement tactics with industry trends.

Best Practices, LLC conducted this study to highlight different return-rate levels and approaches that leading organizations utilize to assess warranty management. In addition, the study examines the methodology behind these metrics as well as the factors used to evaluate warranty management success.

KEY TOPICS

• Return Rate Metrics and Reporting
• Performance Measurement and Reporting
• Insights and Trends for Warranty Management

• Percentage of units returned for each of the product families managed in terms of units returned / units shipped
• Percentage of monthly warranty costs for each of the product families managed in terms of total monthly warranty costs / total monthly sales
• Rolling time frame(s) used in reporting return rates internally
• Return types tracked and included in calculations of standard return-rate metrics
• Other measures used to evaluate warranty management performance besides warranty return data
• Importance of customer satisfaction factor into overall evaluation of warranty management performance

Return Rate - Percentage of Units Returned: The average return rate in terms of “units returned / units shipped” for all products in the entire benchmark class was 1.04%.  This figure is almost twice as high as the average return rate according to the second return-rate formula used in the study – “total monthly warranty costs / total monthly sales."

Return Type Calculation Specific to Company: Not all companies calculate return rate the same way. Return types commonly included in the calculation of standard return-rate metrics at benchmark companies were: Product Defect, Mislabeling, Down on Arrival, Recall / Safety Alerts, and No Problems Found. Return types tracked but not included in the calculation of standard return-rate metrics were: Failure to Meet Customer Needs, Customer-Induced Problems, and Software Updates.

METHODOLOGY

The research employed a data gathering approach that gleaned both quantitative and qualitative data from a representative sample of 24 leading global organizations. Leaders from five benchmark organizations provided additional insights through deep-dive interviews.

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