The Uptime Blog
The November, 2009 issue of Air Transport World has a good article about the MRO business, in which Chris Spafford, a partner with Oliver Wyman, is quoted as saying, “the rebound appears to be very, very extended, 2010 will look a lot like 2009 from a market perspective. It will be another challenging year for MROs.” The article goes on to make comparisons between the current maintenance downturn and the slow-down after 9/11, including analyzing the number and age of aircraft being parked, the flight hours being accrued, and various inventory strategies for components. The bottom-line however, is that the maintenance market has too much capacity and so MROs are desperate to reduce costs.
I bring this up because MROs are being forced to make decisions based on short-term survival, even as they want to invest for long-term growth. In the same ATW article, R. Gene House, Executive VP and CMO of Timco Aviation Services says, “You can talk to somebody about a five-year process improvement plan and you’ll get heads nodding up and down about how wonderful it is, but nobody’s really paying much attention to that. They are looking at what we can do to get expenses out of the next quarter.” As compelling as continuous improvement initiatives may be, they require process change which takes time to design, evaluate and implement. MROs don’t have that time; they need a way to accelerate existing processes while simultaneously laying the foundation for process re-engineering.
For instance, airlines and MROs tell us that maintenance technicians spend as much as 60% of their time resolving procedural conflicts/discrepancies, searching for information, and completing required documentation. And given that more than 30% of service is unscheduled/break-fix, information systems have a major impact on productivity. These companies would welcome a solution that automatically sends customized, detailed work instructions to/from mechanics and electronically completes and signs-off the work cards for archiving and audit trails. If this type of system could be rolled-out quickly and fit seamlessly into the airlines and MROs existing IT infrastructure, it would meet the immediate need to increase maintenance productivity. Furthermore, if the solution formed the basis of a completely integrated maintenance execution system that tied all aspects of technical documentation, parts procurement and reporting into the ERP/MRO system, then airlines and MROs would readily embrace it.
Not surprisingly, such a system exists. Enigma has many customers using Enigma InService JCG (Job Card Generator), which fulfills the immediate and future needs of airlines and MROs. One of the latest advances, currently being tested at several airlines, is the ability to turn generic OEM job cards into intelligent, airline- or MRO-specific customized job cards with electronic completion and signoff. This is another example of how InService JCG helps forward-looking airlines and MROs get fast ROI while also preparing for full automation of their technical information delivery.
As we get closer to releasing this new functionality, more information will be forthcoming. In the meantime, those interested in this capability are encouraged to contact Enigma directly.
Our suspicions have been confirmed, people are driving old cars longer. R.L. Polk & Co. conducted an analysis of more than 249 million vehicles and for the 12 month period ended June 30, 2008 they concluded that, “Americans are keeping their cars and trucks on the road for record periods as the economy has weakened.” (As reported in Automotive News.) For cars, the median age rose from 9.2 to 9.4 years, and the median age for all-types of trucks rose from 7.3 to 7.6 years. Since these are median numbers, statistically speaking there are lots more old cars and trucks driving around.
This got me to thinking, with so many old vehicles on the road, spare parts sales (for OEMs and dealers) should be excellent. But from what we’ve been hearing, they’re not. Dealers are hurting on all fronts, including part sales. Keith Crain of Automotive News discusses this problem as he describes the need for dealers to get back to basics. “For dealers, it means taking another look at the service department and making sure it’s taking advantage of every opportunity to maximize revenue. Wholesaling parts is something that most dealers don’t bother doing. Just letting the phone ring is an easy way to take orders. Why not put a couple of trucks on the road and look for new business?”
Crain’s recommendation for door-to-door parts sales seems archaic; it totally ignores the opportunity of the Internet. Unfortunately, given the poor state of dealer support his suggestion is a viable, but expensive, alternative. Without advanced solutions from the OEMs, selling parts door-to-door is the only way dealers can expand their parts business. According to a Carlisle & Co. survey mentioned in last week’s blog, dealers have been openly criticizing OEM technical support but it’s unclear if OEMs are listening. Dealers looking for an internet storefront may try to use a 3rd party parts catalog but those can be expensive, fail to integrate with dealer management and inventory systems, and are notoriously inaccurate. Dealers need a comprehensive OEM solution that is always up-to-date and improves their ability to develop/expand their wholesale parts business.
Today, technology is available that allows OEMs to easily deploy/update online and offline parts catalogs and service information. Unfortunately, many manufacturers are satisfied with capturing only 20% (or less) of the spare parts for their products. OEMs don’t seem to want to compete for parts sales against big store fronts like AutoZone. But they should, because the storefronts assume success is tied to the convenience of their location and the price of their parts, which totally misses the point that part sales start in the service bay. If OEMs gave dealers access to software that quickly identified the right problem and ordered the right parts, both the OEM and the dealer would capture more market share. (There are two parts to this process, getting the correct diagnosis and identifying the right parts—both are critical to a successful solution.) Furthermore, dealers could use such a system to provide greater value to independent repair facilities (than storefronts), allowing them to capture more wholesaling business. The key is to have high-quality content within the solution.
Last week’s blog pointed out that dealers are happy with the OEM technical content. What isn’t good is the way that content is deployed—it’s not making dealers more efficient/productive. There are solutions to this problem—a few forward thinking OEMs, in various industries, are using technology to improve customer/dealer support and aftermarket sales. Now it’s simply a matter of time before other OEMs make this a priority. For more thoughts on how to solve this problem, take a look at these blog posts:
Lots of OEMs fail to provide useful technical support for their dealers. Recently, Carlise & Company started reporting results from their 2009 NASPC North American Automotive Service Manager Survey. Responses were received from over 9,000 dealer fixed operations managers representing 20 different brands. (Therefore, the survey seems to have statistical significance.) In a blog titled, “Decoding Satisfaction,” David Carlisle begins to highlight some findings that indicate a real problem for automotive dealers. He notes that, “’Technical Support’ is the one area of the survey that gets the lowest scores from all 20 participating brands—it is pretty close to the heart of a fixed operations manager.”
Carlisle uses the scores for Overall Service Satisfaction to break down the data and focuses on two categories of dealers, those that gave their OEM a rating of “highly satisfied” and “somewhat satisfied.” (He explains why those two categories in his blog.) To detect any trends, he then compares each score from the detailed questions to the Overall Service Satisfaction score. The resulting picture—using red, yellow and green color-coding—indicates that dealers are comfortable with the quality of OEM technical content, finding it easy to use and comprehensive. On the other hand, technical and parts support (online and phone) is an issue, across all brands.
I bring this up because many OEMs have been trying to improve dealer relations and dealer support. One approach, taken by many, is to improve technical content—manuals, catalogs, service bulletins, etc. The problem is that just as manufacturing a great car does not guarantee great sales, writing great content does not guarantee great customer/dealer support. Based on our experience, OEMs have been spending too much money creating wonderful technical content and not enough helping dealers make use of that content. A lot of critical information remains stand-alone, with no easy way to deliver and integrate it to dealer management and business systems. As a result, OEMs’ investment has not improved dealer throughput, or customer satisfaction and loyalty. It’s wasted money.
As if to prove the point, every time an OEM asks Enigma to speak with their dealers we hear the same two questions, ‘Will it help me find/order the right part faster?” and “Will it accelerate the diagnosis and repair?” Carlisle’s survey results prove that an OEM can produce the best technical content in the world but if it doesn’t help dealers improve their business it’s of little value.
The solution is to automate delivery of updated service/parts information and to easily integrate that content with existing parts inventory and service management systems. This is the type of system that has allowed our OEM customers to improve dealer support—increasing service bay throughput by 12-18%.
Based on dealers’ low scores for technical support, there is a clear opportunity for OEMs to improve the situation and gain a competitive advantage in the marketplace. There will always be disagreements between OEMs and dealers over things like pricing strategies, warranty programs and franchise requirements. But when dealers start complaining about something like technical support—a problem fully within the OEM realm of control—OEMs must offer a solution. With years of experience helping some of the most sophisticated OEMs improve customer and dealer support, Enigma helps OEMs deliver the solutions their dealers need.