Repair Pal for Repair Costing


Transparency Improved by Repair Pal

On many occasions in this blog we have have decried the lack of transparency in service parts and service repair operations. Recently we found an interesting web site which addresses this for the automotive repair market. It is called Repair Pal. It provides both repair costing – estimation, as well as repair locations that can provide the intended service.

We performed a search for our Honda Accord for a repair we had performed several years ago. This is what the report looks like.


As you can see, it differentiates between dealers and independent shops, with the dealers being more expensive. It also breaks down the labor vs. part cost.

After receiving a “quote” one can look towards the right side of the screen where possible locations are listed to have the work done.


All we can say is, what a great service. We think this is Repair Pal is the first place to check before getting any repair done. Try it out for yourself at the link below.

http://www.repairpal.com Further Capabilities Repair pal allows you to search specifically for the service you need. It also provides a range. We recently needed to find timing belt replacement for our Honda. You can perform a search…


..or you can select.


Advice

RepairPal also provides advice as to when to perform repairs. Our car is 12 years old, yet it does not have enough miles to justify a timing belt replacement. However, RepairPal recommends the belt be replaced every 6 years, which is a great insight and shows that we are completely due for a replacement.


Automotive Subassembly Outsourcing and Who Really Made Your Car

Automotive

New Information

In a previous post we wrote about the inefficiency of automotive service parts networks.

http://www.scmfocus.com/servicepartsplanning/2009/05/15/auto-service-part-networks-are-a-mess/

The line of reasoning of the article was that manufacturers were unnecessarily outsourcing the management of service parts too low in the supply chain – at the dealer level and the auto service parts could be greatly improved in their management through a national and regional system of service parts management. Furthermore, that dealers were incapable of creating effective service parts websites and that this function should be centralized as well.

Structure of Auto Industry

What we learned from the book Who Really Made Your Car, by Thomas H Klier and James Rubenstein, is the following:

  • 70% of the parts of automobiles are made by suppliers
  • Manufacturers are actually now primarily assemblers
  • Much of the intellectual property and complex component manufacturing is owned and provided by the supplier / component manufacturers

Who

Suppliers Actually “Make” the Car

Suppliers are producing most of the car and providing many different manufacturers with similar items. This is explained in the graphic below which provides a great insight into the many different places that the car’s major components are coming from. The sourcing pattern seems identical to, although far more complex than that of laptop manufacturers. (although laptop manufacturing is even more outsourced, with contract manufacturers producing HP and a number of other major brands out of the same factory and sometimes the same production line.

Camery

From Automotive Weekly

We took the example of one vendor called Dura. A visit to their website demonstrates that they make numerous automotive components, which they sell to many different manufacturers.

Dura

Dura’s Part Distribution Model

Dura does not sell parts directly to retail customers, but they do to dealers and independent shops. (however, dealers do have a stranglehold on the industry, and many parts are carried only by dealers) This is one of a number of areas where business are opposed to “free markets,” and instead select tying agreements and monopolistic competition.

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eBay

Why Doesn’t eBay Own the Auto Aftermarket?

eBay is the largest service parts database in the world. However, for some reason, eBay is not prominent in automotive service parts. The fact that automotive service parts are expensive, yet only a modest service part market has developed on eBay is an indication that there are significant restrictions to who can get access to parts, and that there are in all likely strong restrictions on part suppliers, as part of their agreements with manufacturers as to who they may sell parts to in the aftermarket. No such restriction exists for computer components, where anything can be found and purchased on eBay.

eBay

Even the most esoteric service parts for computers are available at low cost on eBay. For more on eBay and their success in service parts see the link below.

http://www.scmfocus.com/servicepartsplanning/2007/07/22/parts-databases-and-ebay/

______________________________________

What This Means For Service Parts Network Design

What this means is that the dealer system for distribution is even less efficient then we originally thought. People are going to dealers to get parts they think are made by manufacturers (Honda, Toyota, etc.), that are actually made by suppliers. All of these middlemen could be eliminated from the system and actually should be. These suppliers are the creators of these components and they should not be controlled by manufacturers, much less have to go through dealers – so dealers or independent repair shops can add an extra markup with no value add – to service parts.

References

Who Really Made Your Car,Thomas H Klier and James Rubenstein, W. E. Upj0hn Institute, 2008

Why Service Parts are Good for the Environment

ServicePartsforTheEnvironment.jpg

Where Are Service Parts in the Environmental Discussion?

Not sufficiently discussed is why service parts effectiveness is good for the environment. The same family that dutifully recycles, may also be the same family that trades in a car after 3 years for a newer model. Many electronics items are designed never to be serviced, or to be very difficult or expensive to service. One example of a popular consumer item that could be easily improved is iPods and iPhones, both of which lack a replaceable battery. This combined with a replacement program where the iPods must be shipped to Apple or independent service shop, encourages people to simply go and buy new devices.

iphone.png 



Apple has some of the best consumer electronics engineers on the planet. So why can’t they standardize around easily replaceable batteries for the very popular iPhones and iPods? Currently these models must be sent in and it costs between $25 to $60 to have the battery replaced. The consumer will of course compare this with the cost of a new iPod, which has more features. iPods and iPhones are small compared to cars, so cars and houses are a better place to start in terms of improving serviceability, however, Apple is used here as an example of a lack of service priority by a company that could easily make a difference.

Things Are Changing

The US in many ways created and leads the world in the disposable culture concept, and we are responsible for both tremendous waste, in addition to exporting this wasteful concept to other countries through both our example and our international marketing programs that promote “the good life.” However, this concept has run into the limits of environmental constraints and throwing away will have to be replaced by both recycling and keeping things longer. There are two ways to keep things longer before they even leave the factory:

  1. Build items to last
  2. Build items to be serviced

Both of these concepts run head first into the influence of marketing, which is focused on selling more units and sees design for serviceability to be both a waste of resources as well as a possible deterrent to future sales (i.e. planned obsolescence)

Improved Service In Addition to Improved Serviceability

Many things could be done to make items last longer, as there are many things that could be done to decrease the cost of servicing (including improving the availability and ease of accessing service parts). Many of these opportunities are being completely wasted because business places service parts and sustainability very low on its priority totem pole. In the case of automotive parts, subservience to an anachronistic dealer system has thoroughly undermined a more logical approach to service parts networks. See this post on how wasteful and badly the US automotive part system is managed.

http://www.scmfocus.com/servicepartsplanning/2009/05/15/auto-service-part-networks-are-a-mess/

The movie Yank Tanks is a documentary on how, due to the US embargo of Cuba, the Cubans were required to keep their stock of 1950 and 1960 American cars operating with no service parts except those which they fabricated themselves.

yank-tanks.jpg 



Not originally intended to be a movie about service parts and service management, there are actually important lessons about these topics as well as insights on how to live in a more environmentally friendly way.

Let’s Be Cuban?

If the Cubans, who started with little domestic part manufacturing industry, and with no access to the original service parts, could keep circa 1950 and 1960 Chevrolets and Cadillacs working properly up to the present day, why can’t we extend the life of our Hondas and Toyotas a bit longer than 10-12 years? Clearly, it is not ability or opportunity, but comes down to priorities. If we understood and internalized how close we are to maxing out non-renewable resources we would re-arrange our priorities, focus less on style and status and more on sustainability.

Conclusion

Service parts and service maintenance are critical factors in reducing our environmental footprint. The longer items are manufactured to exist, the more they are designed to be serviced, and the better they are serviced, the less they have to be replaced and the less recycling (which also takes energy by the way) has to be done. The example of automobiles and iPods are only a few examples that have been used in this post but the same theme extends to everything from housing construction and servicing to a wide variety of consumer items. There is almost nothing that could not be designed to last longer and be better serviced.

Footnotes

Its understood that cars on Cuba do not get the type of miles that cars in the US do, and we are not necessarily proposing that people keep their cars for 40 years. However, the life of cars could be certainly extended from 10 to 12 years to 20 years with several adjustments that would not at all be onerous.

As a continuation of the concept serviceability and environmentalism running headfirst into marketing, it is clear that serviceability and environmentalism runs headfirst into stock price driven capitalism more generally. There has been a lot of talk about making capitalism more green. Its important not to pretend you can optimize two things that contradict each other. In the article above, increasing the serviceability of items means that fewer new units are sold per year. There is no way around that. No number of environmental commercials produced by Exxon showing spinning dolphins, and promising both growth and environmental health, will change this. It’s a question of priorities, continued growth in aggregate sales of manufactured items can only come at the cost of a greatly degraded environment, which is losing its ability to support humans at their present level of population, much less the population growth that is coming.


Automotive Dealers Mostly Useless

Money for Nothing

The degree to which dealers are “taking it easy” is evident in the latest Consumer Reports survey where despite the overwhelming advantages of being part of a dealer network, dealers on average provide a customer experience that is 7% lower than that of independent maintenance shops. However it gets a lot worse when actual repairs are needed. For those that required repairs, only 57% of customers were satisfied with dealers vs. 75% who were satisfied with independents.


The consumer reports survey is a stark condemnation of automotive dealers.

Why Do Dealers Perform So Badly?

So the natural question is why are dealers performing so badly. The traditional concept is that dealers provide better, although more expensive service, and that they provide better service because of the following:

  • They are trained by the manufacturer
  • They have information available from the manufacturer
  • They are more expensive
  • They know the cars better because they work on the same make over and over again.

Clearly the outcome (service performance) does not match the bullet points above, and in fact, a number of the bullet points above are dated. For instance, Honda stopped sending its mechanics to its own internal training program several years ago, which by most accounts was excellent, and has instead outsourced its mechanic training to a trade school in Arizona, which is nowhere near as good, and which does not specialize in Honda. Knowing little beyond basic repair, mechanics are now increasingly reliant upon Honda’s remote service technicians that are available by phone out of Honda’s Southern California main office. Honda at one time had a sterling reputation in service maintenance, and it now no longer does. If you bring your Honda into a dealer now, you can expect a technician trained by a generic trade school which was a low cost bidder to Honda.

The Monopoly Explanation

Most likely, automotive dealers are not better because they do not need to be to survive. This is the best explanation, when everything else is tilted in the dealer’s favor, and they still cannot perform in a manner competitive with companies with far fewer advantages. Of course, this does not even include the costs that dealers charge, which is widely known to be exorbitant and far more than independent stops.

Service Parts Website Incompetence

I first found how bad dealers performance was when we tried to find service parts on their website for online purchase.

See this link for the full article:

http://www.scmfocus.com/servicepartsplanning/2009/05/15/auto-service-part-networks-are-a-mess/

As I recount in the article, I had a devil of a time finding a very simple part (the right interior door handle cover to a 97 Honda Accord), and after visiting many sites for hours, I can state with confidence that dealers have no idea how to put together a service parts transaction website. Furthermore, I question the logic of having manufacturer’s outsource their parts management to dealers, when manufacturers are much more capable of doing themselves or outsourcing it to companies that actually know how to manage large service parts inventories, (Amazon.com is extremely capable of creating a service parts shopping site.) Is this a strategy designed around enhancing the customer service, or a compromise thrown out to the dealers to enhance dealer profits?

A Better Model

Additionally, since cars should be built to order items, and ordered online, out of small showrooms that just stock test models, combined with the fact that dealers can neither maintain websites nor provide service superior to independent shops, the dealers value-add to the car buying and maintenance cycle is not apparent.

honda_dealership_800x532
Dealerships typically have very nice buildings. However, aside from architectural flair, dealers are not a value added part of the purchasing or service chain. Wise automobile manufacturers of the future will offer their cars direct from their website (or from a small retail outlet with test models) – saving tremendous money in reduced inventory (not having cars sitting around on lots), and allow independent shops to flourish though both providing a top-notch service parts website (for both dealers and customers), and through offering extensive service documentation with the creation of a service parts portal which publishes and builds on maintenance information by allowing mechanics in the field to contribute to its content. (see the example of just such a portal below)

http://www.servicepartsportal.com/

The New Dealer-less Model

Any car company that were to operate under the dealer-less model, would be extremely cost competitive with the current manufacturers running the cost heavy and inefficient dealer model that have to base many of their decisions not on what is right for the customer but what makes dealer happy. In fact, they could not be effectively competed against on the basis of either cost or service parts management or overall service level.

Conclusion

Dealers appear to be cruising on their monopoly position and the fact that customers come to them without considering all of the alternatives. The evidence for this is their very poor showing in terms of customer satisfaction for repairs, and in their inability to create or maintain service parts websites. Given the technological development of the web, dealerships are no longer necessary and should be done away with. However, it is going to take a car company that brings a novel disruptive approach to the industry to make this happen. Currently, the auto industry completes on things like quality and style, however, there are numerous other aspects that can also be competed upon. One is the service supply chain, and another is a remote dealer model. A company which got these aspects right would be at a serious advantage in terms of both customer experience and costs.

References

This is actually a very good blog on automotive dealers. However, this article is symptomatic of the problem in terms of thinking about dealers.

http://wardsdealer.com/ar/autowhoopeebankrupt/

In it the author, who seems to know a good deal about dealers bemoans the closing of dealerships by the large American automotive manufacturers. However, the analysis seems misplaced. While the author is focusing on the number of lost jobs, what he is not focusing on is how little value the existing dealer structure adds to the process and to the consumer. Jobs that do not add value in an economy do not deserve to be saved (of course this applies to those with degrees from Harvard and Wharton who work on Wall Street over people that work for dealers of course). Still, why is there no mention in these articles of the atrocious behavior on the part of dealers, and how dealers perform far worse than independent repair facilities, or how their inventory heavy push model of distribution is completely archaic? For us the question is not why the current dealers being closed are being closed but rather other dealers are even in business.


Why Auto Parts Distribution is So Inefficient



Big Problems in Automotive Service Parts Networks

In our previous post we discussed the problems with how automotive service parts websites are dominated by dealers. We also discussed how this is inefficient and why these web sites should be centralized and either managed by the manufacturer, or simply outsourced to a company that has this as a focus.

http://www.scmfocus.com/servicepartsplanning/2009/05/14/auto-service-parts-websites-a-problem/

However, after further research it turns out automotive service networks have even bigger problems than this. This quote is from the HBR article called Winning in the Aftermarket:

Some years ago, when we studied the after sales network of one of America’s biggest automobile manufacturers, we found little coordination between the company’s spare parts warehouses and its dealers. Roughly 50% of consumers with problems faced unnecessary delays in getting vehicles repaired because dealers didn’t have the right parts to fix them. Although original equipment manufacturers carry, on average 10% of annual sales as spares, most don’t get the best out of those assets. People and facilities are often idle, inventory turns of just one to two times annually are common and a whopping 23% of parts become obsolete every year. – HBR

Improper Parts Planning

When consultants for service parts planning software company MCA Solutions goes into an account and uses its SPO software to perform inventory re-balancing, they often find that parts are kept too low in the supply network. This is often because fill rates are only being locally managed and local managers are attempting to move parts to where they will eventually be consumed. The problem with this is that transferring parts from a forward location to another forward location is less efficient than moving parts from the parts depot to the forward location. Secondly, there is no reason to move a part to a forward location unless there is a high probability of consumption, or unless transportation lead times are particularly long. This analysis of where parts in the field should be located goes by a number of names including multi-echelon inventory optimization, redistribution and inventory re-balancing.

See the diagram below.



See these posts for more on part redistribution.

http://www.scmfocus.com/servicepartsplanning/2008/04/23/drp-vs-multiechelon-planning/

http://www.scmfocus.com/sapplanning/2009/04/23/inventory-balancing-in-spp/

Generally, the independent dealer model continues to work against rational inventory pooling. AMR Research (now part of Gartner) does have a good point when they bring up this point in their paper Service Parts Planning and Optimization.

During the course of this research, we found SPP applications tended to be very tacticalin nature, solving specific inventory, fill rate, or service-level goals. Oftentimes service is still being viewed as a cost center, and SPP applications are not necessarily viewed as the keys to a greater world of service nirvana.
One explanation is that the buyers of SPP software tend to be planning managers ordirector-level planners who have no jurisdiction over service and repair or other areas of the SLM model. Other reasons include outsourcing, where OEMs have outsourced the service process but retain the planning aspects, or the fact that the company was never in charge of service in the first place—think of an auto OEM and the dealers that actually provide the service.

During the course of this research, we found SPP applications tended to be very tactical in nature, solving specifc inventory, fill rate, or service-level goals. Oftentimes service is still being viewed as a cost center, and SPP applications are not necessarily viewed as the keys to a greater world of service nirvana.One explanation is that the buyers of SPP software tend to be planning managers or director-level planners who have no jurisdiction over service and repair or other areas of the SLM model. Other reasons include outsourcing, where OEMs have outsourced the service process but retain the planning aspects, or the fact that the company was never in charge of service in the first place—think of an auto OEM and the dealers that actually provide the service. – AMR Research

Better Service Parts Planning Begins with Cooperative Planning

Rather than having every dealer attempt to manage its inventory, a much more rational and effective setup is for the dealers to pool their parts at a local depot and for the depot to manage the parts for them. Daily local “milk runs” would ensure part flow to the dealers, and would reduce the poor inventory turn of parts at the dealer location. A series of these depots can then be large enough to be electronically connected and to have their inventory represented in a web order fulfillment system that can better match supply and demand than can a series of disconnected dealers all trying to manage a smaller amount of inventory locally. Honda (for instance) could manage this themselves, or instead could outsource the management to a company like Amazon.com, that really knows how to produce transactional web sites and knows how to match supply and demand. This solution would be vastly superior to the current one where small dealers attempt to manage their own service parts websites (and where it took us 2 hours searching various dealer sites to find that we would have to call in to order a part)

Rick_Wagoner_GM_Looking_Sad
What is happening in the dealerships is a disinterest in making changes or becoming more flexible in order to adopt new technologies. Companies can make a lot of money in the short-term by simply living off of monopoly power. GM was the poster child for inept management, inward thinking, abusive supplier relations and unresponsiveness to customers. A good catchphrase for management consultants could be “Don’t be Like GM.” While Honda quality is much better than GM’s ever was, Honda’s dealer network with respect to their service parts management is not all that much different. In fact most manufacturers seem to employ the same inefficient system. This demonstrates the restrictive influence of the dealership system that no matter how good the car company, the dealer system remains anachronistic.

It seems often that the large American car companies have little interest in their service operations. Instead they prefer to spend their money on advertising. They have lost the battle for the aftermarket, and this reflects in their new sales, although they are unable to make the connection.

To quote again from the HBR article Winning in the Aftermarket:

In the automobile industry, for example, there’s a distinct correlation between the quality of after sales service and customer intent to repurchase. Brands like Lexus and Saturn inspire repeat purchases by providing superior service, and, consequently, they have overtaken well established rivals like Ford and Chrysler. – HBR

Conclusion

The current dealer centric automotive service distribution system is an anachronism and is probably one of the reasons that dealerships have such high costs. Instead of attempting to reduce these costs, dealers are simply passing on their inefficiency to the consumer. However, dealers should be wary. While they have used political finagling to prevent web-based car purchases, this will eventually come to pass. The only thing that the dealers are really necessary for is for providing local service. They should do what they can to make their service operations, which includes service parts planning and management as efficient as it can be. A big part of the answer to this is to begin cooperatively or centrally planning and pooling inventory.

Parts Hub

The parts hub concept has also been proposed by John Snow, at Enigma, which is a software company focused on parts procurement decision support. The post on this topic can be found here.

http://www.uptimeblog.com/aftermarket/how-fewer-dealers-can-sell-more-parts/2009/05/

Reference

Service Parts Planning and Optimization, ARM Research 2007

Post-Reference

After this post was published, we found that auto dealers have a considerably poorer track record on customer service for repairs than independent shops. This promoted us to write this article that questions the validity of dealerships generally and proposes a dealer-less model.

http://www.scmfocus.com/servicepartsplanning/2009/05/18/automotive-dealers-mostly-useles/

John Snow has some interesting things to say about this concept at the link below.

http://www.uptimeblog.com/electronic-parts-catalogs/simplifying-parts-sales-make-it-easy-for-the-customer/2009/05/


Why Auto Parts Websites Are a Problem


Caught in a Time Warp

It is always amazing to come upon a technology that is so amazingly underutilized. This would be the case for service parts online databases.

The Story

We needed a door handle assembly part for a 1997 Honda Accord. First we started with eBay, which really had a pretty small inventory. We could only find the door handle assembly for a four door, not for a two door. This was a dealer only item. The trouble began when we started looking through dealer websites for the item. The experience began to get us thinking that the dealer value-add is seriously in question. Dealers are not necessary to buy cars (they could be bought online, but tested at a manufacturer sponsored center in a mall that had just a few models). The care could then be either transshipped from a different location, or simply build to order. However, instead of this we have this medieval auto dealer system that holds massive amounts of inventory so buyers will make impulse purchases “that day.”

Service Databases

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.”

SFHonda
San Francisco Honda, like 99% of the dealerships, seem to seriously misunderstand what the web can do, and how it can help automate transactions. Now we will be calling to the dealer, just like we would have back in 1940.

Why Has Online Parts Supply Demand Matching Been Decentralized to Dealers?

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. It appears as if the dealer network (a way for manufacturers to sell franchises and not have to worry about retail, is interfering with the new realities and efficiencies of the web. Automobiles may have to be serviced locally, but there is no reason, with our fast shipping network, for parts to be managed at dealer locations. And especially when a customer wants to order a part, there is absolutely no reason they should have to a dealer to do so.

Its does not have to be this way. The fulfillment could be performed by dealers, but Honda could manage the front-end, much like Amazon.com.

Learning from Amazon.com

The lesson from Amazon is that the web based supply demand matching no longer needs to be performed by the same organization that performs fulfillment. See this article on Amazon.com and how they serve as a supply demand matcher.

http://www.scmfocus.com/sapplanning/2009/05/07/gatp-atp-trees-and-amazon-com/

IT and Monitoring Competence and Fourth Party Logistics Providers

The concept of multi-partner coordination enabled by monitoring tools is a concept in logistics called fourth party logistics and is covered in this post.

http://www.scmfocus.com/fourthpartylogistics/2009/05/23/fourth-party-logistics-providers/

It’s a sad fact that there is simply not a lot of thinking going on in the management of service parts.