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The Illusion of Extended Warranties

IN Amazing Things, Reliability On 12-12-2014

They say that the poor do not have money to buy cheap things.

The logic behind this is that if you buy low quality then you may have to buy the same product more frequently. When you buy cheap, you buy twice.

Let me tell you why.

A decade ago, a customer foresaw the rise in gold prices and asked us to substitute with a silver conductor instead. The savings were immediate, yet cut the product life expectancy from 30 years to 7 years. Understanding that the product needed to perform 15 years from now, we refused and another company won that business. The customer recently ended up going back to a gold solution.

Phones get cheaper and more feature-packed each year. Same with cars and shirts, processors and displays. Is there something wrong with buying cheaper technology? In most cases there is nothing wrong as technology is getting much better.

You feel like you got a deal but then….brokenphone

One of our customers selected a $90 display instead of the high-quality $200 version. After thousands were deployed in the field, the unit required repairs at a rate of $125 per hour. When you imagine avoiding all that downtime and damage to the brand, paying the $200 price really is a deal.

In both of these examples, supply chain pressures did not take into account the total cost of ownership. And that is why no one should be able to afford to buy cheap.

The Illusion of Extended Warranties

Many people believe that extended warranties while expensive are smart investments. We believe that a brand that pushes an extended warranty means someone somewhere took a shortcut. Most goods can be made more reliable and can last 5+ years, yet instead are designed to last 90 days. Retailers and brands then make the consumer pay extra for the peace of mind over the next 5 years. And when you refuse to buy an extended warranty, you accept that the product may fail. Industry-wide over the past two decades, accountability for reliability has shifted from the brand to the consumer .

NATEL EMS has found that extending the life of products can be cheaper in the long run and sometimes even in the near term as well. Buying and using quality components creates a more reliable and less reworked finished product. We have seen that when 50% fail a lot, the 50% that pass are not as reliable as the good parts in the lot where 99% pass. Creating that reliable lot means less scrap, and we gladly pass along those savings to the customer. When the volume supports it, the upfront DFM, DFT, and DFP engineering offers a nearly instant ROI as well as a long term saving on repair.

Another Lesson learned the hard way.

While working with a lighting customer, we were able to develop a manufacturing process that helped improve the reliability of the customer’s product. We developed a specialized pallet that limited oven heat to critical areas on the metal clad PCB. As a result of this process improvement there was less stress on the LED solder joint, which ultimately helped the product survive longer. Sample units sent to the customer exceeded their testing requirements and the customer was able to re-assess their warranty while offering a more robust and longer lasting product to their end customers 

You get what you pay for, after all. We should not ask our customers to pay extra for that peace of mind. That peace of mind is earned as brands are built and without it we allow for knock-offs to flourish.

Our advice: depend on quality products, and run away when you see an extended warranty again. We believe parts should last and quality matters. Most of our customers feel the same way. What are your thoughts?


2 years ago / 1 Comment

12

DEC

1

Comment

NEO Tech

1 Comment

Mario Loaeza

2 YEARS AGO

Keep sending this messages, I think is good information that help us not to forget the basic things of business, in this case Quality, also you always learned something new. Thanks

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