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Guarantee agreement: definition and important aspects for buyers
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Guarantee agreement in a nutshell:
A warranty agreement is a legally binding contract in which the supplier voluntarily undertakes to guarantee certain properties or the functionality of a product for a specified period of time. For purchasing, this is an important tool for quality assurance and risk minimization, which has a positive impact on total cost of ownership.
Example: A machine manufacturer grants a 36-month warranty on all moving parts of a production system and contractually undertakes to send a technician on site within 24 hours of a fault being reported and to replace defective components free of charge.
Contents
What is a guarantee agreement?
A warranty agreement is a contractual agreement between the buyer and supplier in which the supplier provides certain guarantees regarding the quality, functionality or durability of the delivered goods or services. It serves as a guarantee for the buyer that the purchased product meets the agreed specifications and that any defects will be rectified within a defined period of time.
Core elements of a guarantee agreement
Significance for purchasing
In the procurement process, guarantee agreements play a decisive role in ensuring quality management in purchasing and the reliability of the products or services supplied. They offer the purchasing department additional security and minimize the risk of follow-up costs due to defective deliveries. Clear warranty conditions allow companies to better control their supplier management and build long-term business relationships.
Guarantee agreement: From standard guarantees to service level agreements
The warranty agreement is a key instrument in the procurement process that creates security and trust between buyer and supplier. Traditionally, simple guarantees have been used to ensure basic quality standards. However, with increasing customer demands and more complex supply chains, it has become apparent that more comprehensive agreements are required. This change reflects the need to demand clear, measurable and extended value propositions to minimize risk management and provide transparency into supplier performance.
Old: Standard guarantee agreement
Traditional approach: The traditional warranty agreement was usually limited to basic warranties set out in simple contractual clauses. These standard warranties usually covered defects in materials and workmanship for a specified period of time, often 12 to 24 months. In practice, this meant that the supplier was obliged to repair or replace the product in the event of a defect. However, there were often no clear definitions of response times, services or responsibilities in the event of failures. In addition, communication channels were not standardized, which led to delays and confusion. The limitation to physical product defects without consideration of services or performance criteria was a significant disadvantage, especially in industries with complex technical requirements.
New: Service Level Agreement (SLA)
Service Level Agreement: Modern warranty agreements are increasingly manifesting themselves as Service Level Agreements (SLAs), which define detailed performance standards and key performance indicators. SLAs go beyond simple warranty commitments and specify precise parameters such as response times, availability, maintenance intervals and quality checks. By using digital technologies and real-time data, performance and compliance can be continuously monitored. Key innovations such as automated monitoring, KPIs and clearly defined escalation processes improve the transparency and efficiency of supplier relationships. In practical terms, companies benefit from reduced downtime, improved services and greater customization to individual business needs. SLAs make it possible to proactively manage risks and continuously optimize supplier performance.
Practical example: Introduction of SLAs in the telecommunications industry
An international telecommunications provider was faced with the challenge of improving service quality for major customers. Clear requirements were defined through the implementation of SLAs: Network availability of 99.99%, maximum repair time of 4 hours and monthly performance reports. With the help of a central monitoring system, compliance with these targets could be monitored in real time. Within the first year of introducing the SLAs, the average downtime fell by 60% and customer satisfaction increased measurably by 35%. In addition, significant cost savings were achieved through proactive maintenance and faster response times.
Conclusion on the guarantee agreement
Guarantee agreements are an indispensable tool in modern purchasing, guaranteeing both legal security and quality standards. The careful design and digital integration of warranty agreements not only enables effective risk minimization, but also creates the basis for long-term, trusting supplier relationships. Clear regulations, efficient processes and the consistent use of innovative technologies for warranty processing are crucial for success.
