Managing Extended Warranty

Outcome

You have created extended warranty records that can be used for entitlement check when selling a spare part.

• A warranty (MILOSW) record is created in 'Equipment. Connect Warranty' (MOS390).
• Warranty details (MILOTW) are created in 'Equipment. Open Warranty Details' (MOS393).

Before you start

• The warranty type must be defined as an extended warranty in 'Warranty Type. Open' (MOS710).
• The warranty period, fund charge, warranty content, claim content, and other information must be defined in 'Warranty Type. Open' (MOS710).
• A content type must be defined in 'Content Type. Open' (COS470).
• The content type details must be defined in 'Content Type. Open Details' in (COS471).

Purpose

The sale of an extended warranty is part of the sales of equipment process, as shown in the following figure.

A non-stocked item is used to create a customer order line that is actually an order line for an extended warranty. The order line is used to trigger the creation of extended warranty records when the customer order line is delivered. The warranty records are used for an entitlement check when selling a spare part.

When

An extended warranty can be an extension of the validity dates of the standard warranty, a warranty that covers different things than the standard warranty, or a warranty that is sold when no standard warranty is granted.

How

You can only sell an extended warranty for serialized items (items with lot control method 2 = each lot number considered a serial number).

The extended warranty item is a non-stocked item that has item category 13 (Non-material item) and the 'Non-material type' field set to 02 (Extended warranty) in 'Item. Open' (MMS001/G).

The item number identifies the extended warranty type. If there is no extended warranty type with that specific ID, then the customer order line is not allowed to be created.

There are two scenarios when you sell an extended warranty:

• If you sell the extended warranty at the same time as you sell the serialized item, then you make a connection between the two customer order lines.
• If you sell the extended warranty separately, then you make a connection to the previously sold serialized item.

When you enter the warranty customer order line, a pop-up window is displayed. The pop-up window allows you to provide a customer order line number and line suffix or a product and serial number (a serialized item). You can also select the start date for the extended warranty.

You can select from the following different start dates:

• The start date of the standard warranty
• The end date of the standard warranty (end date +1)
• The requested delivery date on the order line.

If you select the two first alternatives above, and no standard warranty is created, then the requested delivery date on the order line is used.

Note that the use of the requested delivery date means that the serialized item and the extended warranty will be on different deliveries if the requested delivery dates are different. That means that the serialized item and the extended warranty will be on different invoices, unless you report both deliveries and create a summary invoice for them.

By clicking OK in the pop-up window the order line for the extended warranty is created. If you are in the pop-up window and you do not remember the order line number, then you can go back and check that information. By clicking Exit you return to the order lines in (OIS101) where the fields will still contain the information you previously entered.

1. Sell the Extended Warranty at the Same Time as the Serialized Item

   The customer order line number and line suffix are provided in the pop-up window, and in this way you connect the two order lines together. There can only be one extended warranty connected to an order line. The extended warranty order line will point to the line number and line suffix of the serialized item, and the serialized item order line will point to the extended warranty order line.

   This helps you to:

   • Manage deletion and closure of the order lines
   • Keep the order lines together in the customer order process
   • Obtain the start date on the extended warranty based on the standard warranty dates.

   The item number on the serialized item customer order line is used to update a field for product number on the extended warranty customer order line.

   At delivery (customer order line with status 66), the extended warranty is created. The start date of the extended warranty depends on the selection you have made in the pop-up window during customer order line entry.

   During invoicing, the extended warranty customer order line is updated with the serial number of the serialized item in the 'Serial number' field.

   Note that you cannot:

   • Sell an extended warranty for a quantity greater than 1
   • Have a quantity on the extended warranty order line that is greater than 1.

   The reason is that the deliveries cannot be kept together in case of partial deliveries.

2. Sell the Extended Warranty Separately

   The serialized item is provided in the pop-up window and stored on the customer order line in the 'Product number' field and the 'Serial number' field.

   At delivery (customer order line with status 66), the extended warranty is created for the serialized item that was stored on the customer order line. The start date for the extended warranty is the requested delivery date on the customer order line.

3. Pricing

   All normal pricing functionality for a customer order line is available for the pricing of the extended warranty. There is no possibility to have the price of the extended warranty calculated based on the price of the serialized item you sell.

4. Extended Warranty as Part of a Kit

   If the extended warranty is a kit line, then a relation is automatically created with the first included item, provided that it is a serialized item. If it is not a serialized item, then you are not allowed to create a customer order line. This allows you to have a configurable kit, where you have a pop-up window that prompts you to select a warranty type.

   A simpler solution is to have a dynamic kit, where on the H panel in 'Customer Order. Open' (OIS100) you decide which of the extended warranties to select.

   The start date of an extended warranty that is included in a kit is the requested delivery date on the customer order line.

   A kit with a reservation on the header is not allowed to have an extended warranty as an included item.

   An item defined as an extended warranty item is not allowed to be a kit header.

5. Sell an Extended Warranty for a Kit Header or Kit Line

   An extended warranty order line can be created for the kit header if the reservation level is 1 (Kit header), provided that the kit header is a serialized item

   An extended warranty order line can be created for the kit line if the reservation level is 2 (Kit line), provided that the kit header is a serialized item.

6. Creating Warranty Fund

   An extended warranty creates a fund via an internal charge, provided that you have connected a fund charge to the warranty type in 'Warranty Type. Open' (MOS710). The charge must be defined as a fund charge in 'Order Line Charge. Open' (CRS275). The purpose of the fund is to cover future warranty expenses for the serialized item.

7. Statistics

   Statistics for extended warranty are updated as normal. Note that a zero cost on the extended warranty order line means that the statistics will indicate a higher profit and contribution margin than what will be the actual outcome, since the cost of the warranty occurs later.

   The product number (PRHW) and serial number (SERW) are added to the statistics (OSASTD and OSBSTD tables). The fields identify the serialized item for which an extended warranty is sold. The 'Product number' and 'Serial number' fields are key fields in the statistics. Therefore, an extended warranty can either be easily excluded from a report or special reports can be created for an extended warranty separately.

8. Views

   Product number (PRHW) and serial number (SERW) are added to the field group OIPV1, used for customer order lines (OIS101), and OIPV3, used for customer order line inquiry (OIS301). The fields identify the serialized item that an extended warranty is sold for.

   Also the order line number (PWNR) and the order line suffix (PWSX) are added. The fields identify the customer order line for which an extended warranty is sold.

9. External Documents – Printouts

   The printouts of the quotation, order confirmation, and invoice contain the item number and the item description. Therefore, the warranty type and description do not need to be printed, since the item number and the warranty type are the same and the descriptions should be the same.

   The printouts contain the product number for which the extended warranty is sold. The invoice printout also contains the serial number.

   The layout of the printout is Extended warranty for: 'product number' 'serial number'.

   Additional information can be printed using the normal item texts from 'Document Text. Open' (OIS035).

10. Accounting

    The accounting rules can, for example, be defined for the 'Non-material type' field (NMIT) in (MMS001/G) or for an item type or product group that is used to identify extended warranty items.

11. Batch Order Entry, API (OIS100MI)

    The following fields are added to the transactions AddBatchLine, AddLineBatchEnt and SndBatchLine:

    • Product number (PRHW)
    • Serial number (SERW)
    • Order line number (PWNR)
    • Line suffix (PWSX)
    • Extended warranty start date (EWST).

    The following values for extended warranty start date are relevant:

    1. = The start date of the standard warranty

    2. = The end date of the standard warranty (end date +1)

    3. = The requested delivery date on the order line.

12. Cost

    The cost on the order line is zero, since the cost for the sale of the extended warranty is zero. The cost for the actual extended warranty is spread out over time and it is determined by customer claims against the extended warranty. Use inventory accounting method 0 (Zero cost) in 'Item. Connect Facility' (MMS003).

    Having a cost on the extended warranty order line would mean that you take the cost twice. The approach with zero cost on the order line is in line with the approach for standard warranty, where there is no immediate cost for the warranty.

13. Cost Price Rule

    The cost price rule on 'Order Type. Open' (OIS010/I) applies for extended warranty order lines, but a check is never done if the inventory accounting method is 0 (Zero cost). A non-stocked item only allows inventory accounting method 0 or 5 (Simplified purchasing). With inventory accounting method 5, the cost price rule is applicable.

14. Contribution Margin and Contribution Margin Ratio

    The contribution margin and contribution margin ratio in 'Customer Order. Simulate Totals' (OIS110) will be higher than the actual outcome, since the cost of the warranty occurs later.

15. Bonus and Commission

    You might not want to use cost or contribution margin as the basis for bonus and commission, since the cost is set to zero on the order line. Using cost as the basis will not result in any bonus or commission for the extended warranty.

16. Order Line Charges

    You can connect a line charge to the extended warranty customer order line. You can also connect a charge to the order line using the line charge model, so be careful with the setup if you do not want that.

17. Customer Returns

    A return of the serialized item from the customer will not trigger a removal of the extended warranty records.

18. Corrective Invoice

    The extended warranty is like any other customer order line, which means that the extended warranty can be corrected. The correction will affect the fund.

19. Limitations

    • You cannot configure the extended warranty during customer order entry.
    • You can only sell an extended warranty for serialized items (items with lot control method 2 = each lot number considered a serial number).
    • You can only connect one extended warranty to a customer order line.
    • A kit with a reservation on the header is not allowed to have an extended warranty as an included item.
    • If an extended warranty is included in a kit, then it must be a kit with reservation level on the lines. The first line must be the serialized item for which the extended warranty is sold.
    • An item defined as an extended warranty item is not allowed to be a kit header.
    • The contribution margin and contribution margin ratio in 'Customer Order. Simulate Totals' (OIS110) will be higher than the actual outcome, since the cost of the warranty will occur later.
    • The statistics indicate a higher profit and contribution margin than what will be the actual outcome, since the cost of the warranty occurs later. However, an extended warranty can easily be excluded from a report and special reports can be created for an extended warranty.
    • You cannot sell an extended warranty for a customer order line with a quantity greater than 1, and you cannot have a quantity on the extended warranty order line that is greater than 1.