The Uptime Blog
We all know that there is a massive wealth of knowledge that is accumulated by the shop floor engineers and mechanics—the ones who are getting their hands dirty performing the maintenance tasks day in and day out. But capturing that information has always been somewhat elusive. Whether you call it “knowledge capture,” “‘best practices” or “knowledge management,” the goal is the same: find a way to let your entire organization benefit from the know-how that exists in small pockets within your company.
Due to the difficulty we have all experienced in capturing best-practices, it is a common assumption that it must be very difficult to achieve. A holy grail that is pursued but never quite found. But in some cases, achieving this goal can be surprisingly easy.
We’ve seen a few interesting examples of equipment operators saving big, simply by offering their shop floor mechanics a chance to recommend changes to parts catalogs. The idea is quite straightforward: next to each item in an electronic parts catalog (EPC), or each task in a maintenance manual, there is a link that the user can click to initiate a change request. Each time that a mechanic sees a part listing that s/he feels should be updated with alternative parts or processes, s/he simply makes note in the change request form. Those responsible for the maintenace information review the request for technical soundness, then publish it using a one-click approval process that shares this update with all other users of the system. (Dealers can even submit change requests to the OEM so that valuable information can ripple through the entire supply chain.) These maintenance notes are always available even when an updated EPC is received from the manufacturer.
In some ways, this is nothing new: mechanics could always request engineering changes. But the hassle involved with initiating a request usually led to the process ending before it even got started. And in the few cases when mechanics took initiative, the effort of incorporating these changes and maintaining them over time further dampened the spirit. It was almost as if someone who offered best-practices knowledge was considered a ‘troublemaker,’ which further discouraged participation.
Now, with the change requests appearing in-line within the catalogs, these troublemakers are heroes. Their know-how brings savings to the equipment operator, and makes the documentation management process even easier. Of course, the positive feedback that mechanics receive for making the effort is spurring on more participation—the knowledge just continues to flow. And wasn’t this our goal in the first place? Letting the knowledge flow in two directions generates procedural cost savings, almost immediately.
This feature can also be taken to the next level to help with business processes such as warranty management, early warning and inventory planning. I’ll explore this further in a future uptime blog post.
Listening to the financial news these days can be very depressing. Worldwide GDP is in decline along with worker productivity and factory orders. With that many companies have (and rightly so) ratcheted down their corporate spending on everything from travel and personnel hiring to IT infrastructure. However, there are signs that the economy is slowly starting to make a turn for the better; according to a recently published CNBC article, by 2010 economic activity will start to grow again. If you believe in this economic recovery theory as I do, then I would suggest that now is the time for companies to begin investing in areas that will provide them with a competitive advantage when the economy turns.
I would offer that the area with the greatest growth potential coming out of a recession is the aftermarket. Why the aftermarket? During the last 8 to 9 months I have had multiple conversations with companies discussing the state of their business and the economy and what many senior executives have told me is not surprising: “Not only are we not selling new equipment, but companies are not using their existing equipment” With that statement I would argue that once economic activity picks up it will be on the back of existing equipment which has set idle for many months and not new equipment purchases. In thinking about what is generally involved in getting idled equipment ready for operations (service checks and maintenance, replacing old parts, installing updated parts and modifications, etc) I believe the aftermarket over the next 12 months can be a real growth engine for organizations that are prepared to execute.
Why are execution and an early focus in the aftermarket so critical? For two main reasons:
- The aftermarket will be highly competitive coming out of a recession, with companies looking for anyway to generate additional revenues. Companies that are organized, easy to do business with and have a well thought out strategy will win.
- Companies that start to get their “aftermarket house” in order now will get a jump on the competition, those that chose to wait will in my opinion miss the boat.
To put a highly efficient aftermarket infrastructure in place will take every bit of 6 months to a year, if organizations start investing now they will be prepared for the aftermarket wave as the economy starts to grow in 2010, those that chose a wait and see approach will be playing catch up and trying to deploy an aftermarket strategy in the middle of the aftermarket boom.
A March, 2009 press release from Lang Marketing highlights a risk facing OEMs as they downsize their dealer networks. According to Lang, “most of the more than $7 billion in 2009 parts and service sales abandoned by closing dealers (at user-price) will be captured by independent (non-dealer) service outlets and auto parts stores, as well as independent (non-OE) auto parts distributors.”
The prospect of OEMs losing $7B in revenue is a dire prediction. It implies that the remaining dealer network will fail to capture business from any former dealers—and customers will now go to PepBoys for parts and service. For OEMs, a bigger risk than PepBoys may come from former dealers that remain in operation, selling used cars and focusing on the service and parts business. These newly formed independent repair facilities (IRF) will probably avoid ordering parts from OEMs, so whether customers turn to PepBoys or former dealers, manufacturers face significant competition for parts revenue. While aftermarket carnage is possible, smart OEMs can avoid that outcome.
In this new world of automotive service, where fewer dealers support more customers, franchise holders expect OEMs to help them compete against aggressive and knowledgeable IRFs. Former dealers will do everything possible to retain existing customers; however, being dropped by an OEM probably doesn’t help their business. These newly formed independent repair facilities will lose some of the specialized knowledge they had when they were franchise dealers, especially for the newest models of cars. The remaining dealers may be able to gain an advantage through access to OEM service and parts information and supply chains. With OEM assistance, in the form of more accurate and timely information and more streamlined parts processes, franchise dealerships can capture a greater share of the parts and service market.
Beyond acquiring individual car owners, franchise dealers can benefit by developing business relationships with smaller, local service shops that had been served by former dealers—supplying them with OEM-branded parts like a warehouse. Capturing “orphaned” service shops will be extremely profitable for dealers because some components are only available through an OEM franchise. Since delivering the right parts quickly is a major advantage with IRFs, those OEMs that simplify and accelerate their dealer’s parts procurement will go a long way toward ensuring success in the aftermarket.
In previous blog posts I have discussed ways for OEMs to capture more aftermarket business by making life easier for customers and dealers. OEMs that help dealers improve customer service and support will be the ones best positioned to mitigate a $7B risk.
Other Enigma posts on improving aftermarket business:
Manufacturing companies trying to expand their aftermarket parts and service business must grapple with a problem that is unknown to most of their executives—the issue of old (or poor quality) product information. (i.e. maintenance manuals, service bulletins, technical specs, parts catalogs, etc.) Any customer with machines more than five years old is, in all likelihood, making maintenance decisions based on outdated paper documentation—or the electronic equivalent, scanned PDF. Customers running old equipment will eventually rely on old information.
There are billions of machines in use throughout the world that fit that description, and service and parts decisions are being made for them based on old information. Modern authoring tools with robust data formats, like XML, may help future generations of technicians, but OEMs that want to improve aftermarket revenues must find a way to use yesterday’s service information to help today’s mechanics and parts managers. That means getting parts and service information that’s in an old format on-line, tying it into parts ordering systems and then updating and maintaining this information for the future.
Before they begin, OEMs must clearly define their aftermarket business objectives because decisions about cleansing, converting or re-using old data can have significant implications. In fact, for anyone trying to improve aftermarket profits, the cost of making their old data usable is probably the biggest unknown expense they will face. Poor data decisions can easily double the time and money needed to implement a new aftermarket initiative.
For instance, if service information is in paper format there is really no other option than to scan it into an electronic format. But what then? Should the company take the next step and use optical character recognition (OCR) to convert the scanned document into a true, text-based format? If so, what level of conversion accuracy is required? (Accuracy requirements will vary by industry and be driven by the risk of potential errors—in terms of money and safety.) If OCR is deemed too expensive, perhaps metadata or searchable keywords can be added into the file header or the properties of the new electronic document. (This may be a manual process or it may involve OCR, but on a more limited scale and therefore with far greater accuracy.) But what types of metadata/keywords are most useful to aftermarket business activities? What about non-textual information like graphics, schematics and illustrations; or parts lists, calibration and inspection tables? The answers to these questions, and more, will have a significant influence on the time and cost of getting the aftermarket solution up-and-running.
Of course, if the OEM has source documents in an electronic format, so much the better. In fact, it is reasonable to assume that any document printed in the last 20 years was created on some type of electronic authoring tool. Since electronic data will provide much better quality than scanning and OCR the question then becomes how to obtain the original files? And what about any revisions and ongoing updates/modifications?
When trying to improve aftermarket revenues, there are a large number of data issues that deserve thoughtful consideration. Because of Enigma’s vast experience serving the aviation, automotive, oil & gas, rail, defense, utilities and high-tech industries, we are well positioned to provide you with insight and solutions to even the most difficult data problems. The key to success in the aftermarket is cleansing old data to drive new business.
In a recent survey of manufacturing executives, 54% of companies say that maintenance retirements will cost them more than $10MM over the next five years. And 31% estimated the cost at more than $50MM. According to Stephanie Neal’s article in Managing Automation magazine, OEMs can’t afford to make new capital investments, yet “businesses need to run at peak performance levels…Meanwhile, baby boomers are retiring, leaving a gap in the number of skilled professionals who understand MRO operations.”
These numbers are a major concern for OEMs because equipment downtime has a negative impact on business. And we’re hearing a similar message from other capital equipment operators like airlines, rail & transit, and oil & gas. Maintenance capability is critical to keeping equipment in-service, generating revenue and profits.
In the same issue of Managing Automation, David Brousell’s article identifies the top 3 business goals for 2009 as:
- Reduce Inventory
- Improve Customer Service
- Reduce Downtime.
While it may not be obvious at first, these three objectives and the retirement problem share a common characteristic: success relies on improving access to parts and service information. Current maintenance improvement strategies that focus on enterprise asset management or supply chain management (EAM/ALM/CMMS and SCM/SPP) fall short because they lack the detailed aftermarket information necessary to fully address these opportunities and problems. (See a previous blog post on this topic.) Traditional systems can track performance, schedule maintenance and balance inventory but they don’t address the problem of improving service—both scheduled and unscheduled maintenance activities.
With the number of experienced mechanics decreasing and the demands for productivity increasing, how will companies keep equipment running? Some are simply outsourcing maintenance to a 3rd party, essentially buying a “best-in-class” maintenance organization. The problem with this approach is that recurring costs are bound to increase as the company’s first-hand knowledge regarding equipment maintenance decreases.
Another approach is to enhance in-house maintenance by implementing a one-stop-shop for all parts and service information—including the collective experience of the maintenance department—for your equipment. This allows existing service departments to become more efficient and more consistent in delivering maintenance and support, and helps new technicians perform like old-timers. This approach also helps companies to contain escalating maintenance costs, ensuring they retain control over uptime and output.
Implementing a one-stop-shop approach does more for companies than just improve maintenance training, reduce equipment downtime and improve customer service. (Although that may well be enough.) It also helps reduce inventory by ensuring correct parts orders and by providing real-time demand information from the point-of-service to the supply chain management system, allowing more accurate parts forecasts.
Companies that operate capital equipment face a dilemma. They need to get more production out of existing equipment with limited resources—both human and financial. Solving this problem is a big decision. On the one hand companies can outsource maintenance, but once that decision is put in motion it becomes difficult to reverse. On the other hand they can use available technology to improve the in-house maintenance and thereby keep their options open. To my way of thinking, in an uncertain world flexibility is a commodity that is hard to replace and one that I am reluctant to lose.