Warranty departments are usually poster children for the accumulation of excess parts inventory, disorganization, and lack of respect from the other upstream departments in the value stream. It doesn't have to be this way.
One client is doing a terrific job in redesigning its warranty department. They've replaced the piles of excess parts (except, of course, for the components that they always seem to stock out of ) with a two-bin system. Instead of haphazard ziggurats of replacement parts scattered all over the floor, they now have a clean, organized system with cardboard boxes and visual management cards containing all the necessary re-order information. They've effectively reduced their inventory by 70%. While this isn't a huge cost savings -- all their parts are pretty inexpensive -- it's a big savings in floor space and a bigger savings in time. Finding parts in the piles used to be difficult, and now they can pick, pack, and ship customer orders much more quickly.
One other thing this department has done: they've instituted formal "close the loop" meetings with the product designers and developers. When the PD team begins planning the next round of products, they meet with the warranty team to discuss what problems they were seeing in customer returns. Design problems, durability problems, material defects, etc. -- all are brought up in a formal setting to ensure that the PD team doesn't miss the important quality "signals" amidst the larger piles of return "noise." Although it's too early to see the benefits in new product design, it's already easy to see the benefit in morale: the warranty team feels like an important part of the company and the product. They're not the tail of the dog, just another segment of the product circle. Call it respect for people.
How is your warranty department run? Are you getting the best out of them? Are they providing all the value they can?