Blockchain – An Emerging Trend in Warranty Management

Warranty providers today are still dealing with the three critical challenges of the industry: protecting against fraudulent claims, detecting counterfeit products, and deciding on the status of coverage. Businesses are becoming increasingly complex with more vendors, dispersed manufacturing facilities, new distribution channels, and disruptive business models to make matters worse. It’s small wonder then that the processing and administration costs of warranty keep on rising. A study^[1] by IBM found that in the electronics industry, only one-third of the warranty costs go towards repair or replacement of defective goods, with two-thirds being spent on processing and administration. There is a dire need to find better ways of managing warranties to keep costs from rising steadily. Technology has always provided us with solutions to address these problems in the past, so will it come to the rescue again?

Well, it looks like a solution may already be around the corner, based on an emerging technology called blockchain, which originally evolved to enable decentralized transactional data sharing across large networks of untrusted participants, and is based on the concept of a distributed public ledger. Such a distributed ledger technology (DLT) could also be used to track-and-trace parts throughout the supply chain with a complete history of events related to the part. This capability would help in addressing all the three key warranty challenges mentioned above.

Since the blockchain-based public ledger is accessible everywhere, warranty providers would be able to validate the claim and the warranty status at any point in the warranty management process in order to make quick decisions. Also, using the track-and-trace capability of the ledger, they could readily trace the manufacturer of the item, helping them get the repair or replacement process started immediately. The extensive history of the part available would also make decisions on claims easy for the manufacturer.

Once the complete lifecycle of a part is available through a trusted public ledger, it would be possible to see the exact time and place of manufacture, note when the part transited through the warehouses of the distributor or supplier, check when it showed-up in the seller’s inventory, and find out when and to whom it was finally sold. This detailed traceability would make it very easy to detect counterfeits, which would fail to show the expected transition history through the supply chain of authorized manufacturers, distributors, and sellers.

Thus, blockchain-based systems would make the whole warranty management workflow much faster, simpler, and fraud-resistant, drastically reducing administrative and processing costs. A welcome side-effect of a transparent, fast, and efficient claim-handling process would be enhanced customer experience. Thus, blockchain technology could ultimately have a direct bearing on customer satisfaction and brand health while cutting down costs and improving the provider’s bottom-line.

Don’t get too excited yet, though; this technology is still at the proof-of-concept stage in most industries with very few production deployments. However, the applicability of the technology to warranty management is pretty certain. It is just a matter of time before solutions using blockchain get proven, and as we have already discussed above, they will not only address the issues of fraudulent claims, counterfeit parts, and unclear warranty status, but will also increase customer satisfaction and reduce costs by making the claim-handling process fast, fair, and fail-safe. Therefore, if you are a warranty provider, get ready as a blockchain-based innovation is coming soon to a warranty solution near you.

Want to Explore More?

To gain valuable insights into how the latest innovations can help you stay ahead of the market, register for our webinar with a guest speaker from IDC, on September 10, where we discuss the latest innovations transforming warranty management.