Almost all service parts come with a warranty. While the typical warranty lasts from ninety days through to a year, some aftermarket service parts come with warranties which last up to two years. The warranty can tell you volumes about the quality of the part and the faith the supplier has in the quality of the service part.

Service parts manufacturers and distributors are naturally concerned with warranty reimbursements for several reasons. High warranty reimbursement rates can be costly in terms of: (1) safety issues; (2) potential customer relationship problems; and (3) can reduce the profitability of a service part over its lifecycle. Service part suppliers must realize that by properly analyzing warranty reimbursements over time, they can adjust pricing to optimize the profitability of each and every part. By adjusting prices for warranty parts at the right time, suppliers can substantially recognize incremental profits over the lifecycle of the part.

About the Author

Tim Mohnke is a Strategic Consultant with PROS and an expert in parts pricing for automotive, heavy equipment, and aerospace companies. He has more than a decade of experience consulting with companies on strategy and pricing initiatives. In addition, he has functional experience in project management, change management, finance, and marketing. Tim has successfully utilized these skills to help parts companies realize millions of dollars in extra profit and ROIs on pricing projects in excess of 1000%. He received a B.S. from Michigan State University and an MBA from the University of Michigan Ross School of Business.

How Service Parts Providers Can Optimize Margins for Warranty Pricing Using PROS Software