Springfield, Mo.-based O’Reilly Auto Parts was obviously not satisfied with those statistics either. Around 2001, the company began an initiative aimed at reducing the number of warranty returns and the program continues to bear fruit: O’Reilly says its overall warranty returns have significantly been reduced. In fact, in some categories, warranty returns have been reduced by 30 percent.
I recently spoke with Charlie Stallcup, O’Reilly’s director of training, to gain insight into how the company sliced its returns. “We identified early on that quite a bit of our warranty returns were the result of just plain abuse, about one third of them,” Stallcup said. “So we attacked the problem with a three-prong approach.”
First, the company created a quality assurance auditing program for warranties. The program includes field representatives, and information is gathered in the field as well as at distribution centers. This information is communicated to field management and is used to educate O’Reilly’s team members and to hold them accountable to following established warranty policies.
Next, O’Reilly turned its attention to the stores. “We created a dynamic warranty reporting system,” Stallcup said. “It lets the store managers see by line and by customer where the warranty returns for their store are coming from.”
Third, O’Reilly sends out monthly communication to the field that helps address problem areas. For example, batteries and rotating electrical categories are traditionally high warranty lines. But through increased focus, test equipment enhancements and additional training, there have been dramatic reductions. “We have seen warranty reduced by 30 percent or more in several core categories,” Stallcup said.
“Each month we send out a special communication to our highest warranty stores in each region. These store managers must work with their district managers to identify what is driving their high percentages,” Stallcup said. “Most of the low-hanging fruit has been found on the retail side.”
As for the professional side, “We have a relationship with our professional customers and we are committed to providing them with the best service possible. When it comes to warranty, our focus is to make them aware when warranty is high and work together to resolve the issue,” Stallcup said.
“We let our team members know they have a vested interest in all of this,” Stallcup said. “After all, we’re all in this together, our team members, customers and our vendors. Controlling warranty abuse is a win-win for everyone,” Stallcup said.
While the steps O’Reilly continues to take might be intuitive at first, nevertheless, someone had to think of it. Rather than accept the typical return rate, the company decided to do something about it. And while the practices and procedures the company instituted aren’t radical in nature, they were just the trick needed to rein in the problem. O’Reilly took a long-held notion about the industry, turned it on its ear, and changed things for the better. Shouldn’t we all try to do that?
