The Uptime Blog
As many know, PTC acquired Enigma in July of this year, expanding its level and depth of Service Lifecycle Management offerings. PTC is a leading provider of technology solutions that transforms how products are created and serviced.
Since the announcement, we’re pleased to say that the entire integration process has been unfolding smoothly, with PTC and Enigma staff continuing to focus on the continuity of service and ongoing support of Enigma’s loyal customer base. We’ve gotten favorable customer feedback so far and are working hard to make the remainder of the transition just as seamless.
Rest assured though, that although offices have moved, we can still be contacted for customer support or product information.
Customer support remains the same. Just as it has operated in the past, the Enigma customer support portal is still available for customers to submit, view, edit and resolve technical service requests online.
Our Corporate Headquarters is now PTC
Our Burlington, MA USA headquarters has been relocated to the PTC Corporate Campus in Needham, MA. All calls are now being routed through that office. If you have administrative questions or would like to speak to someone in sales or marketing, please contact 781-370-5000 to be directed to the appropriate person.
Every year Polk Automotive analyzes the trends in U.S. car and light truck registrations to gauge the age of vehicles on the roads. This year, like every year since 2002, they reported that the average age of all light vehicles on the road has risen. Today, the average age of America’s auto fleet is an impressive 11.4 years of age, up from 11.2 last year.
This is great news for the automotive aftermarket whose livelihood relies on the sale of replacement parts and service repair. Older cars mean more work and more profits. But while it is certainly notable that the age continues to climb and drivers are keeping their cars and light trucks longer, we wondered what other telling trends were behind the numbers. We learned a few interesting facts.
Baby Boomers are Still Setting Trends
According to a study by the University of Michigan’s Transportation Research Institute, Baby Boomers may be aging along with their cars. As a group, they still drive significant changes in all sorts of demographics, including vehicle purchases.
The study reports that older drivers are more likely to buy new vehicles. Even though auto dealers continue to court the Gen X, Gen Y and Millennial market, it’s the graying baby boomers that have the desire and means to purchase new vehicles. It turns out that nostalgia for the era of the car is a powerful influence.
What about younger drivers? In another study University of Michigan researchers found that younger individuals – those same Millenials that auto makers are targeting for advertising, actually purchase fewer new vehicles than expected. They found that a higher proportion of internet users (the digital natives) were associated with a lower licensure rate. Fewer younger registered drivers mean less reason to purchase.
Are Auto Makers Making Better Cars?
In an age of disposable everything, it looks like automobile manufacturers may be doing the unthinkable – making better, longer-lasting cars.
M. Simon, technical contributor for Manufacturing.net contents that “Engineers Killed Detroit”.
“Cars that are engineered to last longer require that you buy fewer of them in a lifetime. Remember when a car that ran for 100,000 miles was a good car? I do. Now a 200,000 mile or 250,000 mile life is considered a good car. Engineers (aided by competition) did that. And not just American engineers. Engineers all over the world.”
John Tammy at Forbes suggests that “The Unions Didn't Bankrupt Detroit, But Great American Cars Did”. He suggests that today all cars are engineered well. They are built to last. They are reliable, affordable and don’t break down that often like they did in the 1970’s era. Tammy says “In short, cars are simple, prosaic, and easy in a modern sense to manufacture well”. If you believe his position, reliable automobiles have become a commodity, contributing to the longer life of cars and trucks.
Aftermarket Vendors Vying for Parts and Service Business
No matter what the reason for the continued aging of American’s vehicles, one thing is certain. Automotive aftermarket vendors should be prepared to capitalize on the revenue opportunity that is presently available, even though there will be competition from other providers and strong economic obstacles.
Ratchet and Wrench reports that the auto service industry is actually experiencing a downward revenue trend. “In the last five years, overall industry revenue has declined at an annual rate of 2 percent to $30.3 billion. This decline was largely due to declines in the overall economy, which caused a decline in disposable income and corporate profit, effectively stifling the use of vehicles and the need to repair them”.
With tight competition, savvy aftermarket parts and service providers eager to tap into potential revenue streams are searching for the best path to take and have discovered that service operations hold the best opportunities. In Aberdeen’s recent State of Service Management: Outlook for 2013 report, sampled organizations stated that on average service margins were 10.7% higher than those from products.
Where the Opportunity Lives
As product profit margins shrink and service profit margins grow, more companies are placing higher value on the service model and transforming their service centers into profit centers. PTC’s Service Lifecycle Management approach is leading the adoption of service related attitudes with products like Enigma’s InService EPC which helps execute those service management strategies that lead to profitability.
Aftermarket parts and service providers not focusing on service profitability run the risk of being left behind. As Ali Pinder, Research Analyst for Aberdeen Groups says in a recent blog post “This ability for service operations to produce profitable growth has raised the importance of service in the eyes of the executive team, from a cost containment tool to a growth engine for many businesses”.
According to University of Cambridge Professer and servitization expert Andy Nealy
, “[s]ervitization is the innovation of organisation’s capabilities and processes to better create mutual value through a shift from selling product to selling Product-Service Systems. A Product-Service System is an integrated product and service offering that delivers value in use. A Servitized Organisation designs, builds and delivers an integrated product and service offering that delivers value in use.”
Simply put, it is the process of adding services to a product. Especially important for complex equipment, servitization extends the value of a product throughout its entire life cycle, not just its initial purchase. It redefines the provider and customer relationship by transforming the traditional short-term transactional exchange of a product into a long-term relationship with service over the life of the product. Is servitization something new or was it here all along?
There are differing opinions when it comes to the emergence of servitization on the manufacturing scene. While some argue that servitization has long been part of manufacturing, others maintain it has been a recently observed phenomenon.
Indiana University Operations Management Professor Roger W. Schmenner
suggests that servitization has antecedents that go back 150 years but simply wasn’t an attractive revenue stream for some manufacturers with high production capabilities. It wasn’t their core competency. Schmenner says that “[t]he bundling of manufactured goods to downstream-available services was led by companies with new products but with no great manufacturing strengths, as a way to establish barriers to entry. Companies with significant manufacturing capabilities were not as quick or as complete in their integration of manufacturing and service.”
In a research paper, Baines, Lightfoot, Benedettini and Kay
say that “[i]n management related literature, servitization development is commonly traced back to the early 1990s. However, Davies et al. (2007) point out that the industrial marketing literature suggests that pioneering applications originated in the 1960s with the introduction of ‘systems selling’ strategies”.
Whichever theory you believe, long established practice or recent arrival, servitization is a topic that is spurring lively debate in the search for additional sources of revenue in the highly competitive manufacturing landscape. Is service revenue growing?
Much has been written about the growing aftermarket parts and service industry as it relates to complex equipment, including posts on our own blog (Complex Equipment and Aftermarket Support Are Like Peas and Carrots
). But is the idea of boundless service revenue fact or fiction?
According to a University of Cambridge research paper The Servitization of Manufacturing: Further Evidence
by Neely, Benedetinni and Visnjic, the scale of servitization is less remarkable than one might think. Their initial worldwide 2007 and subsequent 2011 estimates reveal that the number of “servitized” manufacturing firms stands unchanged at roughly 30%. The United States experiences the highest level of servitization with 58% in 2007 and 55% in 2011. China saw the most significant increase from less than 1% to 19%. With the exception of China, servitization worldwide doesn’t appear to be vastly or immediately reshaping the world.
While they report that “there have been widespread efforts to servitize,” they go on to describe the “servitization paradox” – that “some firms that have decided to servitize achieve superior financial results, while others achieve superior financial results remaining as a pure manufacturing firm.” Schmenner’s theory that highly proficient manufacturers don’t experience success in servitization may be one explanation for low adoption, but there’s more to the equation than is being considered. And that is the application of technology.Servitization at the center of convergence
Products, services, technology and manufacturing don’t operate in a vacuum. They are becoming increasingly connected at an amazing rate. It is at this point of convergence where servitization is poised to redefine how we structure the business models of manufacturing and aftermarket services. Manufacturers not willing to embrace and incorporate technology will find themselves at the shallow end of the servitization revenue pool.
Unlike traditional manufacturing, which has learned best production practices since the days of the industrial revolution, clear cut paths to successful servitization have not been as easy to find or follow. Big Data
, Performance Dashboards
, and Mobility
are just now emerging, establishing themselves as valuable tools in navigating the route to servitization success. Enigma's InService MRO
and InService EPC
have been leaders in defining that road map. We have developed tools that complex equipment manufacturers use to successfully extend, manage, and capitalize on aftermarket services. It’s the path that manufacturing has been searching for.
As PTC president and chief executive officer James Heppelmann relayed to customers at the company’s annual PTC Live Global
meeting, “The world of building stuff is being transformed into a world of building services tied to stuff.” Complex products, by their very nature will also contribute to the servitization of manufacturing. Complex equipment and the data they generate, collect and share through the Internet of Things
will become part of the service history that manufacturers will use to service their products through their full life cycle. This concept is bigger than us all individually. It is life altering.
Technology is the change agent in connecting the manufacturer of complex products with the aftermarket service of those products. As forward looking organizations like Enigma and PTC combine their expertise
, servitization will become more widely attainable, pushing the scale higher and opening new avenues of revenue for manufacturers.
It would be difficult to manufacture anything without an accurate manufacturing bill of materials (mBOM) – that list of items (and instructions) that are cut, molded, welded, wired and assembled into a finished product. So why would some manufacturers expect their dealers and in-house technicians to service that same equipment without a service bill of materials (sBOM)– that list of serviceable parts and repair instructions that provide a critical maintenance road map for the life of the piece? Each bill of material serves a different purpose in the lifecycle of a product from conception, design and manufacture to service and finally disposal.
While much attention is paid to the early stages in a product’s life – the excitement of an idea being born, the exploration of engineering design and the satisfaction of commercially producing a piece of equipment for sale, not as much consideration is paid to equipment servicing during its useful life, and eventual end of life. It is during the “useful life” that a service bill of materials (sBOM) can make or break a revenue stream for makers of complex equipment. Having one can open up a healthy, free-flowing parts and service revenue stream, while not having one can choke revenues to a trickle.
Why is Aftermarket Parts and Service Important?
The aftermarket service of equipment and parts replacement during a piece of complex equipment’s most productive time – its useful life – is where we see the an outstanding opportunity to capture revenue. According to research firm Frost & Sullivan, in their report, “360 Degree Perspective of the North American Automotive Aftermarket", the aftermarket is expected to have an annual compounded growth rate of 2.3% from 2010 through 2017 – that’s over 91.0 Billion dollars in expected revenue. That’s good news for the automotive aftermarket industry but what about manufacturers of other types of complex equipment?
Similarities to other complex equipment manufacturing industries lead us to believe that they too have much in common with the aftermarket trends in the automotive industry. For instance, comparable economic forces are exerting the same kind of pressure on the healthcare industry. How Cars are Like CAT Scan Machines — What the Medical Device Industry Can Learn from Automotive Manufacturing.
Knowing how lucrative aftermarket parts and service can be and understanding the importance of providing the information needed to perform the work, two things become clear. Manufacturers need a functioning service bill of materials, and they need to quickly and accurately deliver it to their dealer network or in-house service staff for use through an electronic parts catalog.
What’s in a sBOM and why is it so special?
A service bill of materials contains a list of serviceable parts, which can be considerably different than the materials used to design or produce the equipment itself. A serviceable part is an individual part, assembly or component that can (or is designed to be) serviced separately after the equipment is assembled and sold. It is the service bill of material or sBOM that supports the equipment maintenance, repair and servicing after the sale. There are two important ways that the sBOM is different than the mBOM.
In-house assemblies. During manufacture the production team may use many small parts to create an assembly or component that is included in the piece of equipment – let’s say a suspension arm. Engineers designed the component for replacement, not repair meaning if any individual part that makes up the welded piece malfunctioned or wore out, the whole component would be replaced, not the individual plate steel parts of which it is made.
Purchased Assemblies. Now let’s say that the production team outsources some components that make up their equipment – a drive axel assembly for example. They install the ready-made drive axel during their production process. Although the drive axel is purchased as one ‘part’, it has been engineered for repair (ie. bearings and bushings) rather than full replacement like the suspension arm.
Negative Impact of using a mBOM as a sBOM
Using an mBOM to support the repair and maintenance of complex equipment rather than preparing and using a sBOM can shrink parts and service revenue as well as future new equipment revenue. Here’s why:
- Parts Ordering – parts used for manufacturing are not always the same as serviceable parts. Confusion on parts identification can cause mis-orders, missed or omitted parts needed to perform the repair, high rates of part returns and delays in repair resulting in costly equipment downtime.
- Repair Costs – there is a real cost to OEMs to repair complex equipment including both the parts themselves and the labor to perform it. Misinformation on parts, poor order processing, and not having access to the right repair and installation information all contribute to higher repair costs and less service and parts profit.
- Warranty – OEMs and customers incur costs associated with warranty items. For OEMs, the cost of warranty increases if the wrong parts are repaired/replaced. For instance, service technicians may not be aware that a warrantee part may include the replacement of surrounding parts that impact the life of the warranty part. In similar fashion, if a warranty applies to an assembly designed for replacement, but the mechanic doing the repair references the mBOM instead of the sBOM, he/she may perform a repair on part of the assembly rather than replace it, voiding the warranty for the customer. Additional time and materials costs to fix the errors drive up costs.
- Customer Satisfaction – in-house service technicians or the service team of a OEMs dealer network have a big impact on custom satisfaction. The purchase of the equipment may have been a positive experience, but long after the memory of that experience fades, the service team is still interacting and representing the brand and the product. Ongoing negative experiences with service can lessen customer satisfaction ultimately resulting in less goodwill, fewer referrals and/or repeat purchases.
Maintaining a service bill of material is important step in widening the aftermarket parts and service revenue. Distributing that information is just as important. Without a clear method of distribution the value of the sBOM is lost in a sea of inaccessible data. It must be available to dealer and service support staff to realize the real value. InService EPC (Electronic Parts Catalog) is a superior web-native application that enables OEMs to easily publish and distribute accurate, updated parts and service information for their dealer/distributor networks, opening the floodgates to aftermarket revenue.
Tags: aftermarket, electronic parts catalogue, parts and service, parts catalog, InService EPC, dvautier, diane vautier, automotive aftermarket, electronic parts catalog, epc software, maintenance, complex equipment
Aftermarket support can be inexact. It’s hard to define, hard to differentiate, and even harder to transition from cost center to profit center. But, armed with three strategic best practices, aftermarket operations can find and capitalize on opportunity with success.
Benchmarking compares a company’s business processes and performance metrics against best in class or other similar industry standards. Management consultant, university professor and author Peter Drucker best described the value of benchmarking when he said “what's measured improves”, and benchmarking makes meaningful measurement possible.
Benchmarking in OEM or third party aftermarket support is an important step for ongoing and continual improvement. It is the process of identifying key performance indicators (KPIs), measuring them, establishing goals for improving them and then monitoring them to evaluate the level of improvement. According to a Blumberg Advisory Group study, “benchmarking is the key to understanding aftermarket services … and identifying areas for improvement.”
What types of performance metrics are benchmarked in aftermarket industry?
That depends on the industry. For instance, the telecommunications and consumer electronics industries consider key performance indicators to be No Fault Found and the overall length of the depot repair cycle. Blumberg Advisory Group found that “No Fault Found (NFF) remains one of the most cost prohibitive issues for manufacturers. 80% of respondents stated that they are looking for alternative solutions to combat high levels of NFF.” They also found that the overall length of the depot repair cycle is critical because it is essential to operational readiness and sustainability and impacts on-hand inventory stocking.
Accountants and advisors Moore Stephens Automotive, in their Key Performance Indicators for Automotive Retailers report, identify gross return on investment and gross profit percentage (among other indicators) as top automotive parts KPIs. They include gross profit percentage of labor and the parts/labor ratio as KPIs (among others) for service work.
Find and benchmark whatever aftermarket metrics are important to your industry and let those KPIs inspire strategies for improvement.
Integration connects a company’s various departments and business centers. It improves communication, streamlines operations, creates valuable channels for monitoring established KPIs, and helps drive revenue.
Integration in aftermarket operations creates a significant competitive advantage and is an important factor to future success. Enigma’s partner SAP in its whitepaper Best Practices in Complex Equipment Manufacturing, Sales, and Service writes:
“With their spare parts business growing rapidly as a percentage of revenue, many complex product and equipment manufacturers have found their cost centers growing into larger and larger profit centers.Typically, these cost centers have ‘island’ systems that are not integrated to the enterprise, inhibiting communication with customers and customer service organizations, service groups, engineers, vendors, and suppliers.”
They go on to say that “[i]ntegrated applications, especially parts and service catalog information, enable organizations to position inventories, either globally or locally to better service your customers.” SAP’s conclusion is that “manufacturing companies with integrated parts and service information are enjoying reduced inventory levels without a decrease in customer fill rates.”
Jonathan Carey, Managing Director and Head of the Automotive Aftermarket Practice at BB&T Capital Markets, in his 2012 Automotive Specialty Products Alliance (ASPA)presentation Current State of the Aftermarket estimates that the retail online penetration rates for the auto/autoparts industry has a “conservative growth potential of 12%.” That’s a huge growth opportunity that will elude OEM parts organizations still clinging to outdated “island” systems that are not up to par with progressing online usage estimates.
Continued focus on incorporating new technologies and responding to new trends allows integrated aftermarket organizations to outperform their competitors. The introduction or upgrade of an electronic parts catalog, with field service mobility, and browser and device independence (HTML 5 and CSS3 compliance), position OEM aftermarket organizations for continued success.
3. Predictive Analytics
Predictive Analytics unleashes the power hidden deep in business data. Whereas traditional reporting tools show you where you’ve been, predictive analytics uses data patterns to uncover forward-looking trends (either positive or negative) that help guide critical strategic business decisions. It’s the closest thing you’ll get to an aftermarket crystal ball.
According to a Forrester Research study, “predictive analytics enables firms to reduce risks, make intelligent decisions, and create differentiated, more personal customer experiences.” Enigma has identified three critical areas where predictive analytics can provide a competitive advantage for OEM or third party aftermarket service and parts support – to evaluate service and parts processes, identify product and service trends, and drive parts purchases.
- Evaluate Service and Parts Processes
o Gain service & parts insight about how often the EPC is being used and for what purpose
o Gauge the impact of the EPC on business and identify opportunities to capture revenue
o Align people, processes and assets to optimize performance for productivity and profitability
o Measure KPI’s to evaluate goal attainment
- Indentify Product and Service Trends
o Detect hidden service patterns and part search associations
o Efficiency of technical service & parts content
o Learn which specific equipment or models are causing the most (and least) EPC usage
o Identify quality training issues
o Identify opportunities to capture revenue
o Measure the number of lost parts orders due to shopping cart abandonment
o Understand online parts purchase flow and value via submitted carts
o Strengthen customer retention
o Improve cross-selling opportunities through service patterns and part searches
Engima’s most recent InService EPC Version 5.5 release has introduced a Dashboard Reporting feature that sheds light on these three areas to uncover business information, and giving managers and executives more insight into these three critical areas of aftermarket operations.
Knowing and working the three strategic best practices in aftermarket support will position aftermarket operations for continued success.
Equipment uptime is critical. Hospitals need MRI machines to take accurate images in order to make proper diagnoses. Construction companies need boom lifts to build multi-story buildings, and auto manufacturers have a whole dealer network and extended independent repair facility network to support in order to keep their cars, trucks and vans safe and on-the-road.
Manufacturers of complex equipment support their products after the initial sale in order to maintain high performance standards for their customers. But supporting that equipment is challenging. Sometimes manufacturers work with third party vendors to contract that support. Other times, they maintain their own staff to supply parts, and perform service or warranty work. Either way, aftermarket support is a necessary function for customer loyalty and continued success.
Make It or Buy It?
The first question when considering aftermarket support software is whether to develop the software in-house or purchase it out of the box (OOTB). Original equipment manufacturers (OEMs) wrestle with this question regardless of whether they hire third party maintenance vendors or field their own maintenance teams to do the work. Their challenge is how to provide the parts and service information needed to keep their equipment (and their customers) up and running.
Benefits of Out Of The Box Aftermarket Software
While there are many pros and cons to both making and buying and aftermarket solution, we think there are some compelling reasons to choose an out of the box aftermarket software solution. Here’s why:
Software Development as a Core Competency
Software development is an arduous task, requiring a dedicated team of developers and a steady budget. Manufacturers undertaking an in-house, custom software development approach must step outside their core manufacturing competency to create proficiency in an entirely different discipline – software development. This shifts the focus away from what the manufacturer does best – produce products.
Instead, valuable time, money and attention is spent building a team, employing a highly trained staff of developers, and incurring expenses to maintain the team’s education in coding, hardware and ongoing knowledge of new and upcoming technologies. It can be done, but is not the best use of assets or resources. Mis-appropriation of valuable resources may result. In-house development staff members become overburdened with routine daily activity, interruptions and user troubleshooting for desktop applications, which compromises development time and the quality of the resultant software.
A better option is for manufacturers to do what they do best, and outsource the rest. Choose an established out of the box software developed by a company whose sole business is software development and that specializes in the task at hand. Enigma is a great example. Our InService EPC software is an electronic parts catalogs specializing in delivering critical OEM parts and service information for aftermarket maintenance of complex equipment – within a dealer environment, in-house field service teams or outsourced service companies. Our sole purpose is to develop software that provides an entire system for implementation, bug fixes, updates and compatibility. We build parts and service best practices directly into the framework of the software to improve the function and operability of a company’s service business. Manufacturers are then freed to concentrate on performance of their own core business function.
Scalability refers to the ability of the software to support an increasing numbers of users, devices and workloads without data transfers slowing down. If built with scalability in mind, software grows as a company grows – expanding to meet increasing demands while delivering the same high levels of productivity. This doesn’t just mean adding hardware to support increased activity, but ensuring that data integrity between application instances remains constant and synchronization across work processes remains stable. It takes into account security, equipment uptime, and integration with other business applications to improve the flow of information and commerce.
Scalability can be difficult to achieve. Matt Aimonetti, a Senior Software Architect at LivingSocial best describes the concept of scalability in his personal developer’s blog by saying:
“Designing beautiful and scalable software is hard. Really hard.
It’s hard for many reasons. But what makes it even harder is that software scalability is a relatively new challenge, something only really done in big companies, companies that are not really keen on sharing their knowledge. The amount of academic work done on software design is quite limited compared to other types of design, but shared knowledge about scalable design is almost nonexistent (Don’t expect to find detailed information about scaling online video games either, the industry is super secretive. And even if this is a niche market where finding skilled/experienced developers is really challenging, information is not shared outside a game project).”
Scalability makes aftermarket software flexible. It adjusts and allows businesses to adapt to changing market demands by growing rather than replacing the software system. Enigma’s InService EPC software application is created with scalability in mind. It extends the capacity and capability, without the need for new infrastructure, additional personnel, or the development of new software.
Time and Money Savings – Add More Value with Fewer Resources
The argument of core competencies and scalability should be reason enough to consider out of the box aftermarket parts and service software, but the issues of time and money really drive the point home.
Manufacturers today are being asked to deliver more value with fewer resources. The Manufacturing Institute and the Manufacturers Alliance for Productivity and Innovation (MAPI) partnered to produce the 2011 Structural Cost Study. The key finding was that U.S. manufacturers face a 20.0% structural cost burden in the global market compared to manufacturers in our nine largest trading partner countries. This is up from 17.6% in 2008.
To be globally competitive, OEMs are looking for ways to realize bottom line savings quickly with only modest investment. Out of the box software solutions deliver. InService EPC’s out of the box parts catalog furnishes OEMs with shorter implementation periods while Enigma works with them on issues of hosting, data prep, training, testing, and integration. Once in place, InService EPC saves money by providing scheduled updates and improved functionality without the burdensome costs associated with an in-house team.
Equipment uptime is critical. And manufacturers will do what it takes to support their products after the initial sale in order to maintain high performance standards for their customers. Enigma’s out of the box electronic parts catalog software can help make that happen.
Tags: aftermarket, electronic parts catalogue, parts and service, parts catalog, parts catalogues, shopping carts, InService EPC, dvautier, diane vautier, electronic parts catalog, epc software, software
The term “Losing to no decision” is a phrase sales reps use when their potential customer, after a lengthy exploration and proposal process, elects to take no action at all, rather than choose a solution from the sales rep or his (her) competitors. The process ends in stagnation, without a sale – a very discouraging experience for the sales rep trying to close the deal.
A Company’s “No Decision” Perspective
But if we look at the same scenario from the perspective of the company that had been searching for a solution to their business challenge, there are even more serious consequences. The company (and its staff) is worse off than when it began the search, with little to show for all the effort. The lack of action has spurred frustration about the project – possibly discouraging future problem seeking, wasted valuable resources and man-hours exploring the options while the opportunity is unrealized and the original problem is left unresolved.
Avoid Losing to No Decision
Let’s say that you are one of several aftermarket Regional Service Managers of a manufacturing company that makes high-ticket complex equipment like medical imaging machines, industrial robotic assembly components or mining equipment. Congratulations if you actually are the Regional Service Manager. If not, you can always aspire, right?
For a long while now, you’ve been thinking about making recommendations to senior staff that you feel will help the maintenance team become a more active contributor to revenue generation. You want to suggest that the company include additional functionality to the existing parts catalog or upgrade altogether to a highly functional electronic parts catalog.
You’re confident that such a move will reduce costs by providing more accurate parts and service information, streamlining service technician work flow, improving field service performance and minimizing parts misorders. You also know that deeper integration with the company’s business system would give your team access to parts pricing and availability and a built-in shopping cart ordering process would result in increased parts sales.
The only challenge is that you don’t know how to go about making the suggestion in a way that will have impact rather than being ignored. Here is what Enigma has found to be a solid foundation for moving through an electronic parts catalog project and making the right decision to resolve the challenge.
- Have a Goal: Maybe you don’t know all the upfront features, benefits and details like the Regional Service Manager example above. Maybe you just intuitively know that there’s a better way to do things. Any good idea has to be intellectually tangible to gain support, so avoid uneasy vagueness and establish clear goals of what you hope to accomplish. In the example above, the aftermarket manager wants to help the service department become a more active revenue generator.
- Identify Key Stakeholders: Not everyone is going to agree with your great ideas and that’s OK. You only need to gain the confidence of the people who have a direct interest or influence in the decision. This may be the service staff who may be most impacted, the IT department who would oversee integration, and of course the Regional VP who would benefit from an integrated electronic parts catalog or have the authority to veto its progress. Stakeholders are different for every project or company. Figure out who they are and start earning their trust and support. Decision makers can make or break your project.
- Assemble Your Team: Seek out people who share your keen insights, can influence stakeholders or support your efforts. They are your partners, your teammates, and your allies in transforming your inert environment into a dynamic one. They will help keep the project on course. It may be someone like the parts manager who may benefit from increased sales, the top field service technician willing to share insights and experience, or the new IT assistant eager to prove him or herself to the IT department manager. One surprising resource is the electronic parts catalog vendor. Vendors can provide the facts or structure you need to support your position. For example Enigma makes available an RFP sample that can drastically reduce the time and effort put into identifying and organizing the important project details.
- Build a Business Case: Anyone who is responsible for the profit and loss (P&L) of a department or company appreciates when you make a business case that speaks their language. Relate your goals to dollars – what costs will be reduced and by how much will the expected revenue increase? You can still include less concrete results like increased customer satisfaction, but don’t leave out the obvious connection to the immediate P&L bottom line.
Now that you have defined a clear goal, identified the stakeholders, assembled your team, and built a business case, you’re ready and able to help your company move forward with solid decision making.
Finally, the automotive industry is on the rebound. Unit sales, exports, and even motor vehicle employment have made significant gains since their landmark free-fall that began in late 2007. The U.S. Department of Commerce, Economics and Statistics Administration reported that “the U.S. motor vehicle industry has made a remarkable comeback after experiencing an incredibly deep decline during the most recent recession.”
The depth of the fall was remarkable. Motor vehicle unit sales, which had been hovering around the 16 million mark from 2006 – 2008, plunged well below 10 million within the span of a year, hitting bottom in the first quarter of 2009. Since then, it has taken three years to climb back to 15 million units per year, a sales level that hasn’t been seen since the second quarter of 2008.
A Rocky Road
The rocky road to recovery, however, has been filled with pot holes leaving lasting marks on the automotive industry while redefining business relationships, dealer networks, and customer expectations.
Dealer Consolidations – As the number of new car and truck sales dramatically fell throughout the recession, auto dealerships felt the pressure. Dealers, fighting for more sales from fewer customers experienced savage competition and high promotional discounting, forcing many struggling dealerships to shutter their doors. According to a Wall Street Journal report, auto makers also cut hundreds of dealers during bankruptcy reorganization with Chrysler closing more than 780 and GM closing 1,650 dealerships.
OEM Misalignment – While production was bottoming out, consumer preference of car types was changing. Electric cars, hybrids, and compact vehicles with better gas mileage gained in popularity as drivers struggled to battle rising fuel prices. OEMs eager to capitalize on the frugality trend were out-positioned by imports that were already well established in the compact, sub-compact and mileage friendly models.
Light at the End of the Tunnel
Despite substantial changes, the automotive industry is seeing the light at the end of the tunnel. According to Edmonds, an online resource for automotive information, in their Auto Industry Trends for 2013 report, “The U.S. auto industry has shown sustained momentum the past few years, making solid progress toward recovery of pre-recession sales levels. Momentum will slow in 2013 but growth will continue.”
Stronger Dealerships – The same Wall Street Journal article confirms the trend toward stronger dealerships saying “wrenching consolidations behind them, surviving new car retailers enjoy higher sales and profits.” Automotive dealerships and dealer networks are stronger, more profitable with less competition. The same article reports that “the nation's 17,659 surviving outlets posted dramatic profit gains last year, according to a survey by consultant Urban Science. Its survey shows dealer earnings individually climbed by between 38% and 129% over 2009.”
New Technology and New Models – Automakers, responding to customer preferences, have introduced more new models and redesigns than ever before hoping to recapture lost market share. On their website, Enigma customer Ford declares, “No One Has More Cars with 40 MPG.” In a recent blog post, industry analyst Polk, reports that “GM is Relying on New Product Blitz to Halt Share Decline.” They say that “[t]he next 18 months are important for all OEMs, but perhaps more so for GM than for any of its rivals. From mid-2012 through mid-2014, GM will unveil the greatest array of all-new or re-designed vehicles in recent memory, if not in the company's history.”
While news about the state of the automotive industry is mostly optimistic, there are still some potential speed bumps on the road to recovery.
Continued OEM/Dealer Tension – Dealer consolidation culled the weaker dealerships from the network leaving stronger dealers less tolerant of strict OEM franchise demands. In a recent Forbes article, “Auto dealers push back on required renovations,” we see that, in particular, dealerships are resisting the edict to undergo costly facility updates citing thin margins and questionable ROI.
Dealers are also grading OEMs more harshly on their relationship skills. According to DealerNews.com’s 2012 OEM Report Card, “The marriage between franchised dealers and their vehicle manufacturers is a bit worse for wear…”. In particular “…dealers [were] critical of advertising co-op, Service department and merchandising programs, and in some cases OEM rep support”.
OEM Concerns – Gauging consumer preferences and expectations will continue to be a tricky endeavor. Americans are choosy when it comes to automobiles. Just as economy models are rolling off production lines, consumers are upping the ante and demanding more luxury options in those economy vehicles.
Additionally, the explosion of new models and options combined with new technological complexity of the vehicles themselves may take a toll on aftermarket parts and service profits. Producing, distributing, and maintaining updated service information and parts details will become even more exacting and challenging.
Those with nimble, updateable parts catalogs in place (such as Ford, which uses Enigma InService EPC) may fare better as car and truck redesigns continue to respond to fickle consumer preferences.
The U.S. Department of Commerce, Economics and Statistics Administration reports that “[w]hile both car and light truck sales have risen in the first quarter, car sales grew faster. In fact, sales of new cars made up 53 percent of all motor vehicle sales in the first quarter, the highest share since the third quarter of 2009. Higher gas prices have played a role here, as rising gasoline prices tend to shift sales toward more energy-efficient autos and away from light trucks.” Something that’s encouraging to auto both manufacturers and drivers alike.
Tags: aftermarket, parts and service, parts catalog, Illustrated Parts Catalogs (IPC), Ford, dealer support, InService EPC, dvautier, diane vautier, electronic parts catalog, complex equipment
If you’re an original equipment manufacturer (OEM) or a fan of the movie Forrest Gump, you may intuitively understand the connection we’re talking about. If not, you may want to read on while dreaming about the perfect combination of any two items: peanut butter and jelly, baseball and hotdogs, chicken wings and the Super Bowl, beer and… well, that last one was a trick – beer goes with everything.
The point is this. Complex equipment and aftermarket support are the perfect complement to each other – just like peas and carrots.
First consider complex equipment – it’s pretty amazing. It has hundreds or thousands of detailed parts that require high levels of training to maintain, repair or operate. It performs complicated diagnostic tasks, enables production to the nth factor, or completes tasks that sheer manpower alone cannot achieve. Complex equipment also comes with a hefty price tag and an extended product life cycle that could last years or even decades. These are definitely not disposable or consumable types of equipment, but durable long-lasting investments that add capability and value to any business venture. Think medical imaging machines, cars and trucks, or masonry forklifts.
The sophistication of complex equipment, however, means that support extends well beyond the initial design and manufacture of the piece of equipment. It encompasses the entire product life cycle including warranty, post warranty service, and sometimes even remanufacture or deconstruction at obsolescence.
For these reasons, aftermarket support is like the hand in glove to complex equipment. We’re talking the serious business of parts, maintenance and service support to keep these highly valuable pieces of equipment functioning at peak performance with minimal downtime. It’s making sure the ultrasound machine detects the baby’s heart beat, the mechanic has the part and know-how to fix the transmission on your Camaro restoration, and the skid steer loader still turns on a dime while lifting a bucketful of gravel. Aftermarket support keeps life and business humming.
The Pairing and the Challenge
While complex equipment and aftermarket may exist independently, their pairing results in a delightful combination of minimal equipment downtime, higher customer satisfaction rates and exceptional brand loyalty. OEMs that understand this vital connection and actively blend efforts on new sales along with aftermarket support have the biggest potential for long-term gains.
What seems like a natural recipe for success though can be a challenge to achieve. With boatloads of advancing technology, keeping the maintenance and repair of complex equipment simple is becoming more difficult. This is especially true in scenarios like automotive manufacturing, which works with a network of dealerships for new car sales and service. OEMs are taking on more responsibility for helping their dealers understand the new technologies by providing better parts identification, easier access to service information, and new diagnostic tools.
Recipe for Success
A great example of a successful pairing of complex equipment and aftermarket support is Ford with their Ford Parts Advantage program. Their challenge was to deliver accurate service and parts information, and simplify parts look-up for their dealers. They chose Enigma InService EPC software system to streamline the parts identification and ordering process through a user-friendly interface. The system integrated with their key business systems (EPC, SCM, DMS and PLM) so the information was as current and accurate as possible. The deep integration allowed Ford dealerships to up-sell and cross-sell more by prompting staff with related parts and recommended service activities.
The Ford Parts Advantage was a huge achievement. They successfully combined the manufacture of their vehicles (the complex equipment) with an aftermarket support system (Ford Parts Advantage) that reached far into the extended product lifecycle making it easier for dealers to properly service and maintain the vehicles for car owners. Ultimately this gave Ford a competitive advantage by securing higher customer satisfaction and brand loyalty.
Manufacturers looking to recreate the achievement of Ford can find similar recipes for success by considering electronic parts catalogs that can help their own service staff or those of their dealers better maintain and support the equipment for the life of the equipment. After all, without the peas, would we ever eat the carrots?
Cost containment used to be the buzzword for field service. Do the best job you can with the least possible expense while keeping the customer happy. Not an easy task, yet managers in every industry imaginable – from construction equipment to mining rigs, MRI to ultrasound machines, industrial robots to ATMs – have worked diligently to minimize costs associated with aftermarket maintenance, repair and support, even if it didn’t fix the real field service problem.
Luckily, aftermarket field service is changing, undergoing a fundamental shift in how it’s contributing to the original equipment manufacturer’s (OEM’s) bottom line. As it comes of age, aftermarket field service is bringing with it some hefty strategic incentives that companies should not ignore. According to the Technology Services Industry Association (TSIA) “More and more companies are realizing that field agents, with their face-to-face interactions with customers, can have a major impact on customer satisfaction and incremental revenue.”
Field service and customer satisfaction – that makes sense. Field service has long enjoyed a well-established connection to customers and thus impacts the level of customer satisfaction a company enjoys, especially after the sale.
But can field service go beyond creating customer satisfaction to actually generating revenue. Savvy aftermarket service organizations recognize the untapped potential of an OEM – installed customer base as an asset capable of generating a profitable revenue stream. They see the strategic opportunity and are transitioning away from the outdated concept of field service as a cost center – the necessary evil. They are embracing a more progressive approach to field service as a profit (and potential growth) center. Aftermarket service operations – technicians, departments, and managers – now represent the promise of emergent revenue.
A promise of revenue isn’t as tangible as revenue itself, however. As the Blumberg Advisory Group points out, “In order to operate as an Aftermarket Service as a profit center, a company must be able to generate income.” One way many are accomplishing that is through the adaptation of technology, including mobile technology. Aberdeen Group, a Harte-Hanks research firm, notes that “seventy percent of field technicians carry at least one mobile device for field work.”
In addition to tool belts, service technicians are now wielding a whole new set of high-tech tools, making them more effective, efficient and ultimately more profitable. Tucked inside service tool belts are mobile devices loaded with knowledge management software, remote and embedded diagnostics and other smart technologies for spare parts & logistics, like InService EPC. InService EPC is a tool that reduces support costs, reduces catalog costs and increases parts revenue making the generation of profit a more attainable goal.
In service work, managers know that time is money. InService EPC provides the most accurate and up-to-date parts and service information at the point of need so field service technicians are more self-sufficient. They don’t waste call center support time and are able to expertly perform service work quickly with confidence.
From an operational perspective, being able to go digital and manage updates in-house can save even more field service expenses. InService EPC reduces printing and distribution costs. The ability to create updates in-house reduces the costly outsourcing expense associated with updating, printing (electronic or hardcopy) and distributing volumes or CDs of catalog and service information.
Where InService EPC really shines is in the revenue generation part of the equation. It makes parts ordering easy through deep integration with a company’s enterprise resource planning (ERP). With InService EPC, techs can order directly from their laptop or tablet, with highly accurate product and service information right at their fingertips. This generates more parts orders and reduces mis-orders. In fact, it works to eliminate all of the 7 deadly sins of field service operations.
While some service organizations cling to old school cost containment methodology, aftermarket service innovators are arming crews with tools that turn opportunity to profit.
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