The Uptime Blog
Recently I’ve been reading a blog called SPPLAN – Service Parts Planning. Shaun Snapp, the author, wrote a few pieces on his personal experience trying to order a part for his 1997 Honda Accord. In these blogs he touched on the opportunities available for OEMs to develop, what I call, a Dealer Parts Hub (DPH) (see previous post). While Snapp didn’t call it DPH, it is nonetheless what he was describing.
Snapp is looking at the aftermarket problem from a slightly different angle than I am. However, we both see tremendous opportunities to reduce the cost and complexity of buying service parts. Following our advice would allow OEMs to optimize inventory and improve customer support. So where Snapp is focused on accelerating the order-to-delivery process, Enigma focuses on accelerating the parts identification and ordering process. Interestingly, Snapp’s story reveals the impact of both issues because at first he couldn’t figure out the right part number to order and then he discovered the part was only available through a dealer. (I asked Snapp about his experience and he told me that he still hasn’t bought the part.)
The fact is these problems are two sides of the same coin—service parts procurement. Traditional part sites seem to miss the fact that buying a service part is different from buying a t-shirt or book. For a car, truck or bulldozer there are many interrelationships between components, which means that determining the right service parts to order requires an understanding of the equipment make, model, trim package (optional components) and model year. Often this requires a detailed understanding of how to decode the VIN (vehicle identification number) or serial number of the product. (Not an easy task given there are over 250M vehicles on the road in the US and they may date back to the 1980s.) Furthermore, service information like maintenance manuals and service bulletins must often be consulted to understand the latest service and parts recommendations (and these often apply only to a sub-set of all equipment). As a result, I’m not surprised that Snapp couldn’t find what he wanted on eBay and I understand his frustration with the parts sites. They should be up to the job, especially the OEM sites, but most of them are not. As a result, the entire part buying process can be painful.
One of our customers told us that, prior to implementing Enigma, parts orders could take as much as 45 minutes to complete. As a further example, here is Snapp’s first-hand account from his blog:
“When looking through the websites of dealers, it was absolutely maddening to try to navigate them. Most the sites are caught in a time warp and exhibit the worst of web navigation and design. Some of them ask for contact information so they can treat the desire to purchase parts as a ‘lead’… Why does Honda allow dealers, who lack the interest or size to develop competent transactional websites to sell auto-parts on-line? Why are Honda, and other major manufacturers, not managing this with a single website and a national network…And especially when a customer wants to order a part, there is absolutely no reason they should have to [use] a dealer to do so.”
This brings me back to the Dealer Parts Hub. Enigma is just one piece of the overall DPH footprint. But if the experience of Snapp is any guide, Enigma is the critical piece for improving customer satisfaction and brand loyalty. The key to improving aftermarket parts sales is simplifying the parts identification and ordering process. The time is right for ideas like DPH to be implemented and bear fruit.
There’s an interesting article by Michael Lam in Overhaul & Maintenance Magazine titled, “The Curious Case of the Irreproducible Result: Demystifying No Fault Found.” (A No Fault Found is an equipment problem reported during ordinary operations that can’t be traced to a specific cause and can’t be reproduced in a controlled environment.) Although written for an aviation audience, this article offers a good overview for any industry trying to reduce the number of No Fault Found (NFF) events.
NFFs are particularly disturbing because they result in so much waste. When a component is replaced unnecessarily, someone must pay for the new part, for the actual service, for scrapping or repairing the old component (and any associated shipping charges), for replenishing inventory, and for the subsequent repair and downtime when the equipment must be fixed a second (or third, or fourth) time. When a component is mis-diagnosed on a plane, train or automobile (or any other piece of complex equipment), it sets off a series of events that impact customer satisfaction, maintenance productivity, and inventory control, all of which harm revenue and profits.
In the aviation industry, 30% of reported faults can’t be reproduced; and, if you focus on avionics—which represent 75% of all aviation NFFs—the number of problems that can’t be reproduced jumps to 50%. The reason, according to Lam, is “the collision of an irresistible force—the ever-increasing sophistication and complexity of aircraft technology (the dense workings of the components themselves, the size and intricacy of the software programs that govern them, and the proliferating interrelationships among various systems and sub-systems)—with an immovable object: the commercial pressures that cap the time available to line maintenance technicians for troubleshooting.” Do dump trucks, locomotives, and control valves experience similar NFF problems? Given the complexity of this equipment, the advanced electronics and automation that is being added, and the harsh environments in which they operate, it would be logical to say “yes”.
Even the incorporation of advanced (and integrated) diagnostics has not solved the NFF problem. Lam says, “Technicians cannot rely on automated test equipment to do their thinking for them. As the NFF rate shows, they’re not sufficiently reliable. The best corrective is a better understanding of the underlying mechanisms and their interconnections.” In other words, the answer to reducing No Fault Found events is not more automation but rather better information. The article advocates that companies adopt a holistic approach to diagnostics, fault isolation and resolution—all of which is predicated on a more complete understanding of the equipment and the operating environment.
I agree with Lam’s assessment and Enigma has always stressed the importance of providing complete and relevant information to maintenance planners, engineers and parts managers. Whether it’s parts catalogs, service manuals or proprietary maintenance techniques, Enigma supplies all the information necessary to accelerate troubleshooting, streamline repairs and improve maintenance quality. For further reading on aviation NFFs, please see ARINC Report 431: No Fault Found – A Case Study and ARINC Report 672: Guidelines for the Reduction of No Fault Found. No Fault Found is a critically important topic for any company with aftermarket operations; therefore I will post more information as I find it.
Chrysler wants to close 25% of its dealerships (almost 800) taking the total number down to about 2400. GM wants to close 40% of its dealerships to get down to about 3,600. These decisions reflect the fact that car sales are dropping from about 10M annually to about 7M and are forcing the manufacturers to re-think many aspects of their business model: revenue, costs, volume and profits.
After removing almost 3,200 dealers, how can manufacturers increase revenue, decrease costs and increase volume and profits? This question must weigh heavily on the minds of OEM executive teams. (I don’t mean to be insensitive because certainly the OEMs are concerned for the welfare of those dealers and staff that have been eliminated, but they must also focus on rescuing the larger business and limiting the financial damage to themselves and the remaining dealers.) With people buying fewer cars, one area that is ripe for OEM growth is aftermarket parts, which is one of the most profitable pieces of the business.
Aftermarket parts—often called service parts—are the parts sold to support the roughly 250M registered vehicles currently on the road in America (136M of those vehicles are passenger cars.) What is interesting is that the OEMs only have about 10% share of the aftermarket. (See previous blog post: OEMs and aftermarket parts—a bigger piece or a bigger pie.) Two of the questions that probably come up for a VP of Parts are, “After losing 3,200 parts desks, what is the best way to sell parts to the car owners who relied on that dealership? And, “Is it possible to increase service parts volume with fewer dealers?” I believe there are encouraging answers for both questions. It may be time for OEMs to consider a new parts strategy that I call the Dealer Parts Hub (DPH).
DPH is a fairly straightforward concept. Allow customers (dealers, independent repair facilities (IRF), do-it-yourself mechanics) to easily identify and order required parts and service documents directly from the OEM’s website. Then, send the customer to the appropriate dealership to pick up their parts (or add it to the dealership’s regularly scheduled parts delivery).
Certainly there are complications for the OEMs and the dealers that must be addressed; however, none of them are insurmountable. For instance, it is important to find a way compensate the OEM for sharing their intellectual property—parts and service information. Also, the DPH solution must steer customers to the appropriate dealer, especially when an agreement exists between dealers and IRFs to supply OEM parts. Finally, the DPH solution will need visibility into available inventory at each dealer to ensure that service parts are waiting when the customer arrives. There are other issues as well but we know the technology exists to make the Dealer Parts Hub a reality.
Automotive OEMs and dealers are trying hard to return to profitability. Enigma believes we have part of the solution. Future posts will explore in greater detail the requirements, opportunities and benefits of the Dealer Parts Hub strategy.
I recently returned from MRO Americas, where I spent some time walking the exhibit hall, listening to various presentations and serving on a speaking panel, “Regulatory Compliance in the Digital Age.” Here are a few observations from my time in Dallas: the show was busier than I expected, despite the economy; airline concerns regarding the aging MRO workforce are increasing; although my speaking panel was the last one of the entire show it was very well attended. From this I reached the following conclusions:
- MRO remains a critical priority for airlines (no surprise there)
- Airlines don’t know who will be fixing their airplanes in the future (or how they will be trained)
- Airlines want the FAA to give clear guidance and help resolve the significant issues that arise when implementing digital systems
Since this panel was the last topic before attendees left to go home, the Q&A session was informal. Nevertheless, we were surrounded by people asking questions about how to achieve a truly efficient, and compliant, digital MRO environment. The airlines made it clear that they need the FAA to synchronize maintenance regulations with current IT capabilities. Furthermore, they expect the FAA to focus on more than just the airframe and engine OEMs, looking also to the airlines, MRO shops and technology suppliers for input. Airlines want FAA regulations that synchronize safety, maintenance and data standards so that they can be protected from being forced into rigid single-provider systems. (The issue of data standards is very important to airlines as they try to avoid OEM-only systems that may limit their flexibility for procuring parts and service.)
Despite years of IT investment, today’s reality is that airplanes are still being fixed with paper documentation. The result is that after one or two years it is nearly impossible for a maintenance planner to understand an airplane’s service history. It is no wonder that planning organizations take months to properly schedule fleet maintenance and must still repeatedly revise the plan throughout the year.
Paperwork is the bane of our industry, not regulation but literally paperwork. Anyone that has ever been forced to sit on a plane, on the tarmac, waiting for the paperwork to be completed knows exactly what I mean.
The Obama administration is a huge advocate of e-government, green initiatives and consumer safety. These are all issues that the MRO industry embraces. With help from the FAA digital MRO can become a reality, which will improve maintenance operations, simplify safety compliance and accelerate AD (Airworthiness Directive) adoption.
In future blog posts I will speak more on this subject and address some of the preconceived notions that exist around aircraft MRO and the technology that supports it.