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COURSE INSTRUCTOR : PROF . DR. SHAHAB KHUSHNOOD. Chapter#19 Product warranties and liabilities. Lecture No. 16 Course: Engineering Management. MED DEPARTMENT, U.E.T TAXILA. Warranties. Warranties Primary Obligations Replace the defective product

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chapter 19 product warranties and liabilities



Chapter#19Product warranties and liabilities

Lecture No. 16 Course: Engineering Management



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
b reasons for the warranty needs
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
c variation in warranty practices for export products
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
  • Different legal jurisdictions of the outside countries may demand changes in the warranty terms
warranty management
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
trends in warranty claims
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
trends in warranty claims cont
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
trends in warranty claims cont1
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
reliability improvement warranty
Reliability Improvement Warranty

Components Of A Warranty

factors concerning warranty elements
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
manufacturer s reliability improvement warranty risks
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
criteria for selecting equipment for warranty coverage
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
incentives of warranty to both manufacturer and customer
Incentives Of Warranty To Both Manufacturer And Customer
  • The primary incentives to manufacturer and user are as follows


  • 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
incentives of warranty to both manufacturer and customer cont
Incentives Of Warranty To Both Manufacturer And Customer (Cont…)


  • 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
warranty cost model
Warranty Cost Model
  • A model to estimate contractor warranty cost,

as follows


product for liabilities
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
areas examined in building a product liability suit
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