In-Warranty Product Repairs: To Outsource or Not?
Businesses have important factors to consider around the handling of in-warranty product repairs – and whether to outsource or support the function in-house. Some benefits of outsourcing include; ability to focus on core business, reduce setup and operating costs, smooth seasonal fluctuations in resource levels, guarantee service continuity, and independent product review and feedback.While there is risk involved in outsourcing, some ways to manage the risk include; due diligence and careful research for the right partner, then design a strong Service Level Agreement that includes a detailed approval process for work outside of scope.
One of the key decisions a technology company has to make is around the support of in-warranty service for their product lines. A variety of factors – both big and small, and sometimes competing - can have an impact on the decision, whether to handle this in-house, or to outsource the function to an external service provider. Here we’ll discuss some of the advantages and disadvantages of both, and ways to manage risk.
Benefits of Outsourcing In analyzing the value of outsourcing, here are key issues to consider:
Focusing on Core Business
In-warranty repair is a secondary function in most companies, and has to compete for internal mind share with both revenue growing and product development initiatives. It is also setup frequently as a re-manufacturing process, which can be more expensive to run than a true repair operation. Outsourcing allows a company to focus its assets and expertise solely on its core business, while leveraging the knowledge and resources of an experienced and dedicated service provider.
Reducing Operating Cost
Often, the direct cost for repairs is cheaper with a service provider, who can provide significant savings by leveraging a cost structure that’s been amortized over several customers. Similarly, the overhead costs to create the sometimes complex processes that control, report, and manage exceptions already exist, providing you with the necessary infrastructure without the setup costs.
Managing Resources
Seasonal variations can significantly impact a business’s resource levels; an external resource can help support overflow during peak times, OR when fully outsourced, take care of managing the peaks and valleys entirely on your behalf.
Handling Redundancy and Risk
In-warranty processing may not always be a company’s core focus, but it is critical to both customer satisfaction and the way its brand is perceived by consumers. Outsourcing means continuity even if you suffer a disruption to your own business, with a global service partner being able to shift processing between regions if necessary.
Gaining Insight from Independent Review and Feedback
Invaluable information can be gleaned from the in-warranty repair process, with learning incorporated into existing manufacturing or future product development processes. Detailed reporting can be built into Service Level Agreements (SLAs) with a service provider to guarantee review and feedback that’s independent and impartial.
Managing Risk There are of course, risks to evaluate – and manage – when outsourcing a vital component of your business, including:
Maintaining Quality and Control
Outsourcing can translate into concerns over the quality of work and the loss of direct managerial control. With the benefits of impartial reporting there may also be a perceived lack of personal investment and ownership with a service provider, which needs to be mitigated by a carefully crafted SLA. A strong contract, tied to your company’s vision and mission - and supplemented by good and frequent reporting - can actually provide greater overall control over the entire process; it’s in the service provider’s best interest to meet the terms of the SLA, thereby keeping your business and improving their own bottom line.
Watching for Hidden Costs
Manage the risk of extra charges for work outside of original scope by taking the time to build methodology into the contract on how additional work will be billed along with the approval process. This will also give your business a clear view to the cost and ROI on the additional work, something that might not be as readily assessed and evaluated with an internal setup.
Finding the Right Partner
Reduce risk and exposure with due diligence, and minimize security and confidentiality concerns by researching the financial health of the service provider and establishing a strong NDA.
Ultimately the decision to outsource will vary depending on a company’s needs, and the relative importance of some of the issues highlighted above. But with proper time taken for due diligence and to draft a well written and thorough agreement, finding the right service provider to partner with can be a rewarding and mutually beneficially undertaking.
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