SAP SPP Continues to Have Implementation Problems


The pathway is not clearing for SPP as the successes have been few and far between. However, there is a solution.

Bringing Up SPP in the Market

SPP has been a long haul for SAP. First of all, this product was an attempt to bring service parts planning into the mainstream. Rightly so, SAP identified service parts planning as a key underinvested in area in the enterprise. SAP thought it could grow this business and combined part of the code bases of SAP Demand Planning, SAP Supply Network Planning and then added service specific capability that had been sitting in other best of breed applications for a number of years. These include:

  1. Inventory Rebalancing
  2. Leading Indicator Forecasting
  3. Repair Buy Functionality
  4. Partial Service Level Planning (planning low on the service level hierarchy)

More details on the service level hierarchy at the post category link below.

http://www.scmfocus.com/inventoryoptimizationmultiechelon/category/service-level-hierarchy/

SAP even surprised me by coming up with in my opinion the best interface for planning in all of SAP SCM, the DRP Matrix. This helped address a historical weakness in the SCM modules, (at least for one module). However, the initial problems began when SAP approached clients and explained the SPP solution to them. Instead of focusing on just SPP, instead clients were shown a demo that included a smorgasbord of SCM functionality which brought many different modules into the solution (such as GATP) and even the SAP Portal. This was a mistake because even the biggest service organizations have a lot less money to spend on software, so getting them just to purchase SPP would have been a success. Furthermore, service organizations are far further down the capability totem pole than the finished goods side of the business, so their ability to even implement the solution that SAP presented to them would have been unlikely. I have spoken to SAP product management about this, and they have re-stated that this is their strategy and that they think it is gaining purchase with clients.

The Partnership with MCA

A second part of their strategy was to partner with best of breed service parts planning company MCA Solutions and created a “xApp” which combined the forecasting functionality of MCA SPO with the supply planning portion of SPP. I have written previously that I am very much opposed these types of arrangements for a number of reasons.

There are several thorny issues with these partnerships.

  • It’s unclear that vendors should be selecting vendors of clients. The large vendor many not select the smaller vendor that is best for clients vs. best for the larger vendors
  • These partnerships allow SAP to say they have functionality that they did not originate and are claiming extraordinary IP rights vis-a-vis the smaller software company
  • SAP’s partnership agreements require that the smaller vendor declare their IP and that IP that is undeclared can be taken by SAP. This was rather shocking and I think shameful that such an agreement would even be drafted.
  • Unequal partnerships like this are inherently inconsistent with the type of economy that a lot of Americans say they believe in. The Federal Trade Commission has a role, which they don’t seem to take very seriously anymore to prevent over concentrations of power in any industry, and that includes software.

I describe this more fully in this post

http://www.scmfocus.com/inventoryoptimizationmultiechelon/2010/01/its-time-for-the-sap-xapps-program-to-die/

However, as luck would have it, the xApp program is currently dying or dead (the xApp program includes something like 140 different applications vendors that SAP has “partnered with”) and by in large they have not caught on. MCA and SAP’s contract for the xApp program was not renewed.

Project Problems

Despite their missteps, SAP was able to get several companies to buy and implement SPP. However, two of the biggest implementation sites of SPP, which are Caterpillar Logistics and the US Navy, are after a number of years and significant expense not anywhere. Navy is not live with SPP, and unlikely to ever go live. This is something the folks over at Navy don’t like to talk about much, as a whole lot of US taxpayer dollars went to Deloitte and IBM for very little output. The blame does not squarely lie with SAP even though SPP does not work properly. I plan to write a future article entitled “I follow Deloitte,” which describes how every post Deloitte SAP SCM project I seem to work on is barely functional. However, Deloitte continues to get accounts somehow due to the fact that too many corporate decision makers are not performing their research. You can read more about the problems in hiring Deloitte to manage services parts projects here:

http://www.scmfocus.com/servicepartsplanning/2010/11/13/deloitte-writes-ok-paper-on-service-parts-but-would-you-want-to-hire-them/

How About Ford?

Another major implementation for SPP is Ford, but they have seen little value from their SPP implementation. The best predictions I receive from those that have worked on the project is that Ford will eventually walk away from SPP. However, they cannot publicly do this because they have invested at least 9 years and very large amounts of money into the implementation. Therefore, SPP now has no large reference accounts for SPP. A hybrid of SPP has been implemented at Bombardier, however this is the old SIO architecture where MCA Solutions performs most the heavy lifting. Therefore, it can also not be considered a live SPP implementation. None of this surprises me, as after working with SPP, it is not possible to take the application live without custom development work or combining with a functional service parts planning applications. This solution turns SPP into a shell, which can make some executives happy, as it means they are using SAP, but the work is done by a different application.

Reference Accounts?

This is a problem because they were to be used as the major reference accounts to selling into other accounts. The problems at Caterpillar are particularly galling as SPP was actually developed at Caterpillar. Caterpillar Logistics is plastered all over a large amount of SAP marketing literature and is the gold reference account for the solution. Here there is not much to reference, unless as a potential client you are willing to wait that long to bring a system live. And secondly, the degree to which Cat is live is a matter for dispute. Cat will do what it can to continue the impression that they have at least some functionality live, because to walk away would mean a PR problem for them. What would be interesting is to see if SPP can be implemented without a large consulting firm as neither IBM nor Deloitte have had success with SPP. SAP should consider backing a smaller firm or doing it themselves as they need a success in the SPP space. At this point the biggest reference-able account for SPP is Ford.

Where Do We Go From Here?: The Blended Approach

SAP’s Product Management Approach with SPP

Some decisions that have been made by SPP product management are very poor. I think the major consulting companies are out of their depth in implementing SPP, and it needs to be radically improved in order to make more if its functionality effective. A significant amount of functionality that is in the release notes simply is broken or does not work properly.

I have performed SPP consulting and would like to see the module, and service parts planning in general to become more popular and widely implemented than it is. However, its important to consider that SPP only introduced some of the functionality that brings it partially up to par with other best of breed solutions in the current version (7.0) (prior to 7.0, SPP was not really competitive) and it can take several versions for SAP’s newest functionality to work correctly. For this reason, including my personal experiences configuring SPP, it would be difficult for me to recommend relying upon SPP exclusively. I think the experiences at Caterpillar Logistics,Ford and the US Navy lend credence to the idea that going 100% with SPP is a tad on the risky side.

To fill in the areas of SPP that are lacking I would recommend a best of breed solution. Some things like leading indicator forecasting really need to be improved. Furthermore, if you want to perform service parts planning with service level agreements (SLAs) there is no way around a best of breed solution. There are a number of very competitive solutions to choose from, and it all comes down to matching the way they operate vs. the company needs.

Simulation Capability Enhanced with Best of Breed

I will never be a fan of performing simulation in SCM entirely. The parameters in SAP SCM are too time consuming to change and the system lacks transparency. However, several of the best of breed service parts planning solutions are very good at simulation. While it may be conforming to use a single tool, it’s generally a bad idea to try to get software to do something it’s not good at. For simulation I would recommend going with a hosted solution and a best of breed service parts planning vendor. (for those looking for an excellent prototype environment for finished goods, I recently have had a lot of success with Smoothie by Demand Works)

http://www.scmfocus.com/demandplanning/2010/07/using-demandworks-smoothie-for-forecast-prototyping/

As few companies want to make the investment to staff a full-time simulation department (planners are often too busy, and lack the training to perform simulation), it makes a lot of sense to have the application with the vendor. As they are experts in the application, they can make small tweaks to the system and provide long-term support to the planning organization. All of this can be built in at a reasonable rate to the hosted contract.

________________________________________

Conclusion

It only makes sense to use the history of an application to adjust future implementations. In doing so, it is most advisable to pair SPP with a best of breed vendor that best meets the client requirements. The additional benefit of this approach is that you get access to consultants who have brought numerous service parts projects live. And those consultants primarily reside in the best of breed vendors. We were recently contacted by a major consulting company to support them in a client which is looking at SPP (we don’t work for consulting companies), and the consulting company was simply focused on getting the client to implement SPP, so knowing the company, it is not difficult to imagine the stories that were told, and what was covered up to get the client to sign on the dotted line. Companies interested in the full story on SPP’s functionality and how it compares to what else is available can contact us by selecting the button below.

References

My service parts planning consulting offering.

http://www.scmfocus.com/consulting/areas-of-specialty/service-parts-planning/

Discussing the underinvestment in parts.

http://www.servigistics.com/solutions/parts.html

On the precise date the SPP initiative was kicked off at Catepillar Logistics.

http://logistics.cat.com/cda/components/fullArticle?m=115228&x=7&id=382143

 

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.


The Saturn Service Parts System

SaturnPlusServiceParts.jpg
In the article Why Auto Service Parts Networks are a Mess…

http://www.scmfocus.com/servicepartsplanning/2009/05/16/auto-service-part-networks-are-a-mess/

I describe why automotive service parts networks are in such a terrible state. However, I was recently forwarded an article that described one service part network that appeared to be functional. It is with an auto company that was willing to try new ways of business, something that many other auto manufacturers and dealers have not been willing to do. As described in the article at Knowledge at Wharton..

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2366

GM dealers have always had to compete not just with other brands like Ford or Toyota, but also with one another. The competition created a boiler-room environment of price-haggling, which turned off many customers but thrilled others. Saturn, on the other hand, had a “no haggling” policy that it backed up with what may have been its most significant innovation: exclusive market areas for dealers. “That was the huge difference,” says Lokey. In a Saturn store, the sticker price was the final price. And Saturn retailers could confidently adhere to the policy because they knew the customer wasn’t going to find the same new car for $100 less a few blocks or miles away. The exclusive market areas combined with the efficient parts supply chain also allowed Saturn dealers to pay the same price for repair parts. Other GM dealers had to compete with one another to keep their supply bins full, and they often had to buy parts from their rivals. At Saturn, the bins were almost always stocked thanks to a computerized system that automatically sent orders to a distribution center. What this indicates is that beyond creating a multi-echelon system (where stocking decisions are shared using true multi-echelon software) a number of other factors such as how dealers are placed into competition with one another is also important. However, the system relied upon inventory pooling between dealers and the automotive company regional warehouse. This lead to a service part turn-over of on average more than 7 times year (which is quite high for service parts).

The design of the system is explained below from the article in the Sloan Management Review

Saturn’s Supply Chain Innovation: High Value in After Sales Service

Retailers review Saturn target level recommendations at the end of each day, then Saturn automatically replenishes to the agreed on target level. Replenishment orders are received at the central distribution center and are shipped out according to the delivery schedule, leading to a three a shorter response time if the ordered part is in stock at the DC. Otherwise the part is either put on back order or sourced from the production inventory stock. Note that a pull system such as Saturn’s is based on target levels. Using one for one replenishment means that Saturn does not position inventory in advance based upon forecast consumption. The shipped part also is replaced automatically within 3 days (assuming availability at the DC). Saturn essentially tells retailers what to stock. If a part does not sell after nine months, Saturn takes it back and repays the retailer. Each retailer (dealer) inventory system is linked directly to Saturn management system. What is happening here is what few automotive companies use, a centralized service parts planning system. However as described by this article from Sloan Management. Although central inventory resources can be shared, companies often make planning decisions for retail locations independently, looking at forecasts of local demand and lead times from the central depot orsuppliers. Unfortunately, this parts system, which was recommended by Morris Cohen and Hau Lee, is at risk as Saturn is looking for a buyer, and their possible arrangement with Penske has fallen through.

Saturn owners will now be serviced by GM dealerships, which is definitely not what Saturn owners bargained for when they purchased a Saturn. They will now have to work with a considerably lower capability service network. It unfortunate because the Saturn system, if it persisted, could be extensively studied and perhaps copied. Currently, this is not very much written on the Saturn system, and if Saturn dies or dissipates, there will be less opportunity to gain insight into what they did that made them so different.

Postscript:

After this article was written Saturn did in fact go out of business. It is unfortunate that one of the best service parts systems went away with Saturn ceasing to exist. It does not appear as if GM took any of the key learnings from the work described above, as GM still scores poorly in service parts management. Saturn is now only an aftermarket business which will continue until Saturn cars fall out of use.

References

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2366 http://sloanreview.mit.edu/the-magazine/articles/2000/summer/4147/saturns-supplychain-innovation-high-value-in-aftersales-service/


Service Parts Management by Halliburton in Iraq Beyond Belief

IOS

A License to Steal

The story behind Halliburton is well known and has been documented in many articles, books and movies as a company that constantly defrauds the US government. The behavior of Halliburton regarding service management and planning, as documented in the move Iraq for Sale, in Iraq is absolutely shocking.

[tube]6cJlJudDtVE[/tube]

This movie shows Halliburton and KBR deliberately not repairing items in order to charge the government for purchasing new items. This is because of how the contract with the government is structured. It is “cost-plus,” and therefore, Halliburton and KBR have every incentive to increase the cost, as their profits increase in a linear fashion. Secondly, neither Halliburton nor KBR appear to have any business ethics, and therefore, they are doing what they can to increase the costs as much as possible. There are many examples of this, but one that really resonates is the fact that Halliburton will have semi-tractor trucks that break down on the side of the road in Iraq because they either do not change the oil, or check the tires, or even order or stock spare tires. When this happens, Halliburton simply sets fire to the truck, destroying them (so the insurgents can’t use it.) They then charge the government for a new truck, plus their cost-plus margin. They are motivated to not repair even the most expensive items because they make more money this way.

That Halliburton is simply destroying large capital equipment items is amazing, but it is supported by multiple sources. Another form of fraud is related to how equipment is leased, but that gets into a divergent area of malfeasance, and I want to keep this article focused on service topics.

Service Parts and Maintenance: Making the Effort in Service

Organizations and service parts management are in a poor state in the US. The official explanation for this is the philosophy of neglect. The standard The line of reasoning goes something like this:

“Companies want to improve in service parts planning because its good for their customers, the only issue is an issue of education.”

For some time, we personally believed this. However, the Halliburton example demonstrates this is not always the case, and not the only explanation. Other examples of service incapability are stretching the credibility of the lack of education argument.

The Math of Destruction

If Halliburton can charge the government $90,000 + its cost-plus contract for a new truck, they would rather do that then charge the government for a new tire plus the margin. When will this change? No time soon. The Pentagon is now highly dependent upon Halliburton and KBR for all types of essential functions. Secondly, Halliburton continues to contribute mighty to the political process and have hired a number of influential ex-Pentagon officials, that mean Halliburton will continue to get contracts into the foreseeable future no matter what they do and how much fraud they commit, they have a blank check to rip of the government.

Incentives

This is an example of two companies that operate in this manner. However, there are more. The assumption that every company cares about service parts needs to questioned in light of their institutional incentives. If a company can make more forcing a customer to buy a new product, they may prefer this over servicing an old item. Automotive repair shops are known to replace parts that are not necessary to replace. If service management is to be understood then its underlying assumptions must be questioned. It also helps determine what companies and areas to focus upon. For instance, if I were a consulting or service software company I would not bother offering consulting or software services to Halliburton in Iraq. Lets just say, they prefer to buy new….or in fact for the taxpayer to buy new. The whole movie may be seen here. It’s a few years old now, but not much has changed, so it is still quite valid.

http://video.google.com/videoplay?docid=-6621486727392146155

References

http://www.publicintegrity.org/projects/entry/297/bio.aspx

How Dell Shows Parts Connections Online

Dell’s Website and Intel Linkage

Something we found interesting while writing an article on assembly to order in SAP SCM and Dell.

http://www.scmfocus.com/sapplanning/2009/07/04/assemble-to-order-and-dell-and-apple/

This relates to how websites from different companies can be used to interoperate with each other to add functionality for the consumer and maintainability for the involved sites. We were on the Dell website, when we noticed they have a link to the right that states:

“Compare processors to find what’s the best for you.”

Here is the site, notice the orange circle to the right under livechat.

Dell Intel 1

Where the Link Goes

What we found interesting about this was that the link takes you to Intel’s site, where an explanation is laid out for the consumer between the different microprocessors Intel offers in Dell models.

Intel

Who Benefits?

What is even more interesting about this is how Dell benefits. First, they provide valuable information to their consumers. Second, they no longer have to maintain information on their own site about a product that they do not make. We could see links like this for all the components. What this does is demonstrate and make transparent the contribution of suppliers to the end manufactured product.

Extending the Concept to Service Management

This concept can be extended to service parts management. For instance, if a hard drive needs to be repaired, or a microprocessor needs to be switched out, it is the supplier, not the assembly firm (in this case Dell) that has the intellectual property and knowledge of the components. Too often the main brand that performs final assembly has attempted to both present the concept that they “manufactured” the entire item, and that they were the specialists in servicing sub-components that they did not manufacturer. The web provides the ability to show the interconnections with suppliers that made the sub-components and to integrate product and service information in a way that has not been done before. Manuals in the future would be both on-line and integrated. Thus the overall guide to say…the Dell Inspiron 14 could be partially on Dell’s website, but then integrated with Intel’s and Western Digital’s and Corsair’s (etc..) websites. This is all accomplished through linking. Furthermore, each supplier only need write the manual and guide for its components once, and this can be linked to by Apple, Dell, and any other manufacturer that uses that component in their products. This both reduces the costs of maintaining this information, and improves its quality.

Service Labels for Repair Time Transparency

nutrition-label.gif
Government mandated nutrition labels were critical to improving the transparency of information as to what is in food. We are proposing a similar level of transparency for serviceable items.

A Common Sense Proposal

After spending some time researching the topic of service-ability of parts, I learned that items are in more cases than not becoming less serviceable, and that most companies are hiding their reliability information (See these posts for background information)…

http://www.scmfocus.com/servicepartsplanning/2009/06/22/public-mtbf-statistics-for-hard-drives/

http://www.scmfocus.com/servicepartsplanning/2009/06/16/items-becoming-less-serviceable/

Clearly what is happening is many companies are not placing sufficient emphasis on serviceability. Other issues such as the marketability and consumer design priorities are increasingly taking precedence in design decisions. Furthermore, without some increase in transparency, this misallocation of resources and continuation of manufacturing items with little concern for service-ability will continue. Interestingly, in the environmental discussion, what is more often that not left out is how service-able products are. More serviceable products means longer product lifespans, less energy spend in making and transporting new products to stores and customers, and less space taken up in landfills.

Because of this I am proposing a labeling system for serviceable products. This label would state the following:

  1. The amount of time to initially setup an item
  2. The amount of time required to service an item through the item’s lifespan
  3. The total estimated time = item 1 + item 2 above

This could be printed as a large number with an identify-able label.This could be placed on all product packaging for items that require assembly or service. This label would not be on all products, but some likely candidates would be the following:

  • Computers and sub-components
  • Automotive Parts
  • Appliances
  • Housing items such as lights fans, furniture
  • Industrial products

How the Estimates Would be Generated

The estimation of the time required would come from a government testing body, this would be very similar to Underwriters Labratories (electric items come with a UL sticked in the US, and can not be sold without testing for safety). Testing would be performed by using laypeople — not experts in maintenance, to assemble and repair items. Sufficient quantity of people would be necessary to ensure that the times developed had statistical relevancy. The testers would only be provided with the manuals and instructional materials that came with the product, thus the test could also test the manufacturer’s instructional material.

What Would the Label Look Like

The label would be very simple. It should be large and easily recognizable and only needs to provide a three numbers. Here is a mockup.

ServiceLabel.jpg
The Industry Response

Business would fight this initiative as being too expensive and invasive. However, there is nothing new here. Business has fought every single initiative that has improved consumer health and safety. Areas they have fought in the past include:

  • Safety belts
  • Air bags
  • Food labeling
  • Cigarette warnings
  • Drug testing

At the time these concepts were deemed by industry as unnecessary and onerous, however, now they are simply part of how we live. Who can now imagine a world without drug testing or seat belts? Progress is made by deciding what type of system is desirable within the larger context, and then pushing for it.

Where Will The Money Come From?

There is plenty of money is the US to do this. There are trillions of dollars to give to corrupt banks, so there is plenty of money for a small program like this. We have spent around a hundred billion to develop a military fighter jet that is so delicate and specialized, it can not even be used by the military in combat (the F-22), and is considered completely unnecessary by independent military experts. So there is certainly plenty of money to setup a lab to perform laboratory testing for service and maintenance. The expense of doing this would not be all that onerous. Products could be tested quickly, and would only have to be tested when a new product comes out or a change is made to an existing product by the manufacturer. If not every item could be tested, the most widely sold items could be tested, resulting in the highest common good per dollar spent.

How Would This Change Things?

The result would be a significant change in how companies build their products which would make them more durable, and easier to service. Right now companies are banking on the fact that consumers will never know the long term service time and costs of items. Therefore, new product development produces items that have great packaging, compete well on price, but have very little invested in them in terms of ease of assembly, maintenance and service. By placing the Service Label right on product packaging, and on product website, companies will no longer be able to ignore this issue, and consumers will be able to make informed decisions. It will punish companies that release poorly designed and difficult to service items onto the marketplace.

Service to Business

While this would be opposed by many OEMs and their suppliers, not every business would oppose this. Service organizations of business would be in favor of this government testing center as it would allow them to know the lifelong service effort of different items that they buy and maintain. Thus the government testing center would offer a service not only to consumers, but to businesses also.


Why OEMs Should Stop Controlling Service

liftarn_a_raised_fist.jpg
The desire to control is not an attractive feature in individuals or companies. Too many OEMs follow a control model for their service parts and maintenance information which is anti-market, and it should be understood and opposed.

A Trend Observed

It has come to our attention after reviewing several of our previous articles that the less control OEMs (original equipment manufacturers = companies like Ford, Apple, Cisco, etc..) and service organizations have, the better it is for consumers.

Automotive Service Restrictions to Competition

In our article, Why Automotive Parts Networks Area a Mess, I cover how automotive dealers are retarding the development of service parts businesses through their monopoly over many “dealer only parts.” These parts are not even made by the manufacturers, but instead by the manufacturer’s supplier base (on average 70% of a car is not made by the name on the car). The only reason this situation exists is because OEMs compel parts manufacturers to sign exclusive contracts with the OEM that restricts the selling of parts to the OEM or to the dealer network. This is bad for consumers in a couple of different ways.

  • Dealers lack the competence or interest to create service part websites, and thus most dealer parts cannot be purchased online in any way.
  • Consumers have to pay a significant premium for their parts because of the control exerted by dealers and their antiquated supply chain and inventory systems.

Unprincipled Tying Agreements

There is something ethically wrong with these type of agreements. If a company is not making an item, its hard to see how they have the right to determine how that item is sold and distributed. Not only is the item not made by the OEM, but the technical knowledge and intellectual property is not theirs either, that also resides with the parts supplier. There are laws in the US against what is referred to as “tying agreements.” It is typically applied to an OEM pressuring a retailer to sell one of the OEM’s new or less popular items in exchange for gaining access to the right to sell another more established item. I don’t see why the tying arrangement law could not be applied by the Federal Trade Commission to break up exclusive OEM distribution arrangements with their parts suppliers.

Wouldn’t This Be Anti-Market?

This is a very common concern brought up people when exposed to this idea. There is a severe misunderstanding generally about what makes an dynamic and innovative economy…and it have very little to do with moving interest rates around or bailing out Wells Fargo. It has much more to do with structuring the rules of the economy so they provide the right incentives to business to operate openly and transparently. If we really want the dynamic and innovative economy, that according to the business publications we say we want, then we need to collectively show some backbone and begin standing against uncompetitive and regressive legal contracts that enrich non-value added actors at the expense of consumers and market efficiency. There are already all types of laws on the books that break up trusts and uncompetitive, anti-consumer activities. It’s time to start using them again.

Video Repair Guides and Information Exchange

In our article, Using Online Videos for Service and Repair, I discuss how, in the case of repair guides and repair information, OEMs have historically restricted information to users, and how it is the user community that is actually doing the OEM’s work for them by making repair videos available on YouTube.

OEMs have done remarkably little innovating, and placed little effort towards creating quality instructional material for the servicing of their items. Their manuals are belabored, sleep inducing to read and unnecessarily expensive to produce compared to the benefit obtained by consumers. OEMs may find this topic incidental or a non-issue but it is wasting a lot of consumer time. If a regulatory body appeared and placed a label which listed the average number of hours required to assemble or repair items right on product packaging, OEMs would start taking this issue of repair information a lot more seriously. Again, many would call this an unnecessary restriction of the market. However, they would be basing this on a flawed understanding of what makes an efficient market. A market cannot develop without information. Here is an example.

Market Information Example

Lets say a consumer is looking at two items in a store. They have identical features and both from reputable manufacturers, but one is $15 less. It would make economic sense for the consumer to buy the lower cost item correct? Not necessarily. What if the lower priced item, because of a bad manual or bad design takes an hour longer to assemble, and 2 more hours to maintain over the life of the item. Furthermore let us say the consumer values his time at $20 per hour. In this example, the buyer would be in actuality paying $45 more by buying the less expensive item ($15 – (3 x $ 20 / hour) = $45. However, if the consumer is not made aware of this information, they will not be able to make a rational choice. Thus the current information model – which is no information about long term service costs promotes manufacturers to complete on price, to not invest in designing effective instructional material and to make less serviceable items. This results in a less efficient market.


The Place of Regulation in Maintaining Markets

This misunderstood feature is primarily because it has been heavily lobbied against by business through extensive public relations campaigns and influencing educational curriculum and economics research with money. An efficient market requires regulation, just as a fair football game requires officiating. If anyone doubts this, simply try a little test. For one week in the NFL, have all the games played with no officiating, and see what happens to the quality of the game. Thus, regulations that increase transparency and information enhance the market, not the other way around.

*This is the nice thing about blogging, if I worked at a university, I would probably get a lot of pressure from corporate donors for writing this, and our head of department would be angry at us for reducing the department’s fund raising opportunities. (businesses only fund business friendly research) However, since I do not report to any institution, I can present what is well known, but which is career limiting in academics to discuss or publish.


Dumping Manuals

The ineffectiveness of manuals is well researched. The vast majority of users never read them. They also lack effectiveness because, unlike a video, they cannot show the manipulation of items in a 3 dimensional space. Several YouTube videos for each product could probably replace most of the instruction manuals for products that are sold. More complex products would require more videos, which is fine. They are cheap to produce and take less skill to produce than written manuals. To write a good manual, one has to be a good writer in addition to reproducing technical knowledge. However, to make a good instructional video one only needs to know very basic video filming, and simply perform the activity on camera. Videos can show an entire assembly and dis-assembly of an item, providing maximum reproducibility.

Unapproved Uses

Service organization and OEMs are losing control over the information of their products. While they controlled this information in the past, this information was never theirs to begin with. In a free society, anyone can publish whatever they like about whatever product or service they use. History shows that users will come up with many shortcuts and extra uses that OEMs never thought of. In a way, this is similar to the benefits of open source software.

While threats like “voiding warranties” have been used to limit the user’s customization of products, a person has a right to do whatever they like to products that they buy. Users are posting videos for doing unapproved things (such as replacing iMac hard drives) to their items. What has changed is that users now have the distribution mechanism – YouTube specifically, but the web more generally, to provide their own content. Much of this content is of very good quality, and this demonstrates that content like this is not that difficult to produce, and of great benefit to users.

Conclusion

The trend here is clear, the less control OEMs have over the servicing of their items, the better that market will be for consumers and the more dynamic the overall market will be generally. OEMs seem to have little interest in investing in innovation, IT or service generally, so it makes sense to open them up and allow user communities to do the work they don’t want to do, so they can just work on new product design and marketing.

Forward looking OEMs will embrace this and even support the growth of online user communities on their websites. These developments can be incorporated into their own service organizations.

waste-makers.jpg
Reference

After researching this area, I found it goes back further than I thought. This excerpt is from the book The Waster Makers published way back in 1960. Manufacturers often failed to provide in provide information that would facilitate repairs. Recently The Boston Globe protested that appliance manufacturers were getting so “cozy” with service manuals that customers seeking them got the impression they were “censored as if they contained obscene material.” The Electric Appliance Service News likewise expressed indignation on behalf of servicemen, or at least independent servicemen. It said, “Our mail is loaded with gripes daily from servicemen throughout the country lamenting their inability to obtain service manuals from certain manufacturers.” Often this coziness has sprung from the desire of the manufacturer to keep the repair business to itself and out f the hands of independents. The News charged that “some manufacturers do not make service manuals available to all independent repairmen and therefore it is almost impossible to make repairs easily and properly—and at a time-saving expense.


Using Online Video for Service and Repair

YouTube
Videos for iMac Repair

As we described in our previous post, we recently had a hard drive in our iMac crash. After learning of the $420 dollar charge, and the inability of the Apple Store to put in the model that we wanted.


Reliability vs. Capacity

We wanted to downgrade to the higher reliability and lower heat smaller drives, and have opted for a Hitachi Deskstar 320 GB disk. We took out the 500 GB disk that came with the iMac and ran it in an enclosure and were disturbed by the heat it created. Little discussed is a univeral feature of new items. The newer a technology, often the less reliable the technology.


We decided to repair the iMac ourselves. One of the best sources of information on this is not from Apple (they do not endorse users to perform this replacement as they consider it too complicated) but from YouTube. Several users have posted how to remove the front integrated display to get to the drive bay. We have assembled several computers ourselves, and replaced numberous hard drives and this is the first computer we have seen that has its hard drive so difficult to reach that it requires a special approach.

[tube]2YsCTNVEYt8[/tube]

[tube]eBAawbp2GUE[/tube]

youtube=http://www.youtube.com/watch?v=2YsCTNVEYt8

youtube=http://www.youtube.com/watch?v=eBAawbp2GUE

These people posted this video for no profit, and it has helped probably many Mac owners do internal work themselves. Since Apple does not want people opening the case of iMacs, without user created guides, the information of how to open the iMac case would never be made available. Kudos to the YouTube community.

What We Learned from the YouTube iMac “Service Video”

  • What tools we needed to buy before we attempt the replacement (allowing us to order the tools along with the new drive so they all arrived at roughly the same time)
  • How to perform the case opening in a fine level of detail.

Videos are amazingly good tools for learning how to perform complex multi-step activities — and thus are perfect for service parts repair operations.

The Use of Video

Video is popping up here and there in service management. For instance there are DVDs that deal with service management that can be purchased. Below are a few examples that are available on Amazon.com, but the titles are not very numerous, nor all that specific.

Maytag Repair

Motocycle Repair
There are several reasons why DVDs are not the best medium for repair videos.

  • Many people have a small video to contribute and will not go through the effort to produce an entire DVD
  • DVD’s tend to represent the interests and perogatives of the OEM. However, a number of unapproved techniques can be posted by users that the OEM would never publish.
  • YouTube and web video in general is far more convenient for the user
  • The cost is much lower
  • YouTube serves as a central online library for thousands of online videos

YouTube As a Service Video Library

The largest repository of service and repair videos in the world is no doubt on YouTube. However, it is not manufacturers or their service organizations that are leading the way, but individuals who are posting videos out of personal interest and in their spare time. This is yet another example of innovation not coming from inside of companies, but from outside, and from the general public.


Parts Databases and eBay

eBay has created the largest service parts database in the world, and it was not created by any one company (eBay only created the platform), but by the collective efforts of many individuals and companies simply through the listing of items. To read about this, see this post.

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


Using YouTube As a Video Server

Posting videos to YouTube is beneficial for several reasons. Once a video is uploaded to YouTube, it can be presented on any blog, as we have presented videos within the post of this blog. Therefore, the video can be both available to those searching YouTube and those searching the company’s service site. A series of service videos could be created for the most common repair items for a company’s products, posted on YouTube, and then also posted on a service parts repair site. Here is an example of what we are describing.

http://www.servicepartsportal.com/?page_id=255

Conclusion

Companies focused on service should begin taking advantage of video, integrated into blogging software to improve the quality of their service capabilities and to distribute this information to the public.


Items Becoming Less Serviceable


A Story of Un-Serviceability and the iMac

There is not much I own that I like better than our 24 inch iMac, but my sudden understanding of its basic un-serviceability has been a real disappointment. iMacs are not the only things getting less serviceable.

imac_preview-thumb.jpg
What You Learn When Your iMac Goes Down

We recently had the hard drive in our iMac go out.

Drive Reliability

See this link for a very interesting article on drive reliability

http://www.pcworld.com/article/129558/studyharddrivefailureratesmuchhigherthanmakers_estimate.html

This article reinforces what we have experienced first hand — the MTBF numbers produced by drive manufacturers are false. Carnegie Mellon’s lack of differentiation among vendors in this study indicates their research was likely polluted by vendor pressure and or contributions.

What we learned is that iMacs are not designed to be serviced by users. The design of the iMac looks great, but has a very strange assembly that makes it even more difficult to work on than a laptop. The iMac has not screws or other fasteners on the case (except on the bottom for memory replacement). A hard drive is a major sub-component in a computer and tends to be one of the more problematic. It is something that not only should be designed to be easily replaced but should be designed to be swappable. As with media like CDs, there is no reason a door could not be added to any computer, and different hard drives could be added and removed to give the user maximum flexibility in booting to different drives. With a spare drive, this would mean that no computer could be brought down due to drive failure.

acer-easystore-home-server-detail-thumb.jpg

“Swappable” drives have been used in servers for some time, and are now available for home disk centers (which allow for RAID configurations) such as the Acer model above.

However, while no personal computer actually makes it as easy as we think it should be, Apple has designed a case with no entry through the back, so the user or service technician must actually pull off the glass cover with a suction cup and remove the display (delicately) to expose display. Next the display must be removed to reveal the hard drive. Several specialized tools are required for the task. Waiting for tools to arrive from eBay, as well as the Apple Store’s $420 quote for the work, is why our iMac is sitting unused at the time of the writing of this article.

Long Term Trend

This is part of a long-term trend in consumer items to hide the fasteners in order to increase the “coolness factor.” This trend extends to a number of different categories. If one looks back to the cars of the 1930s, one can see that they were more modular, and the rivets, pins, screws and other fasteners were more apparent. What this meant was that cars were more serviceable.

7498-thumb.jpg
The Bentley Speed Six was a very serviceable car. The engine was easy to get to, the fenders were easily replaceable, and the exposed fasteners allowed the replacement of many parts by shade tree mechanics.

By the 1950s, almost all cars had moved to integrate the trunk and fenders into the body, and fasteners were no longer observable from the outside. This resulted in a smoother look, but also in a more complicated design and more expensive automobile to work on.

1950_cadillac_62_conv-cream-fvl_mx_-thumb.jpg
The 1950s Cadillac Series 62 was representative of cars from this era, in that it had an integrated body and hidden fasteners. Bodywork on this type of car is more time-consuming and expensive and must be done by professionals. However, since then, cars have become far more complex and as a result less serviceable still.

Serviceability Trend

The long-term is to decrease the serviceability in items. While this may be good for company profits, it is actually bad for consumer and bad for the environment. The more difficult and expensive it is for items to be repaired, the more quickly they are simply replaced by new items. The problem is that companies do not seem to have an incentive to build long-lasting and easily serviced items. The finance area of the company seems to think it reduces sales of new items (which it does), and new product design and marketing seem to think it reduces the “coolness” factor of products. Marketing and finance have come to dominate US corporations, so it is no surprise that their values have become the values of American business. This is not going unnoticed. According to industrial designer Victor J. Papanek, the following holds.

That while American products once set industrial standards for quality, consumers of other nations now avoid them due to shoddy American workmanship, quick obsolescense and poor value.

Historical View

There is this common impression which is reinforced by advertising that this year’s model is better than last year’s, and that in general we are on a continual upward slope. This is not actually the case. There are many business practices and products that were “better” – better for the consumer and better for the environment — in the past. In addition to serviceability, many products were simply designed to last longer half a century ago. As an example, there is a lively market for classic toasters from the 1950s on eBay. These 50+ year old toaster still work, because they were built to last. The concept of a 50+ year old item is unheard of today.

vntg_50_s_chrome_sunbeam_t-20b_radiant_control_toaster_-_ebay__item_380131389324_end_time_jun-22-09_09_45_00_pdt_-thumb.jpg
This 1950s SubBeam is still working, and adjusted for inflation, is probably selling for more on eBay than it did back when it was purchased in a store in the 1950s. Why can’t more items be built to last and be built to be serviceable?

Noticing Changes

I suppose the question to ask is what has changed? How did American business go from offering many durable and serviceable products to offering products designed to be thrown away? Secondly, how did both American and international consumers become habituated to this new consumption pattern? Thirdly, does anyone think that this trend can actually be reversed by “the market?” Actually, it would appear that on broader goals such as environmentalism (which the life-span of products are a contributing factor towards) that the market will drive product development in the opposite direction, towards planned obsolecense. People generally need to have a better understanding of the relationship between product service-ability and sustainability. It is difficult to see companies making a focus of product service-ability without more pressure from consumers. However, consumers have become so habituated to disposable products, that most don’t know where to begin to ask for this level of build quality.

References

One question I have is if purchasing specialized drives, such as surveillance drives — which are designed for high usage video applications are more reliable than normal consumer drives. Seagate makes a very price attractive model.

http://www.provantage.com/seagate-st3320410sv~7SEGS1UN.htm

This is an interesting article on planned obsolecense in hard drives. We quote from it below.

http://www.driveservice.com/bestwrst.htm

For a long time, I was a big supporter of IBM drives and recommended them at every turn, but now not so. They too have had enormous numbers of drives returned to them recently, and I am sure that is what spawned the Hitachi buyout. I have noticed over the last couple of years that manufacturers have stopped putting little mini in-line fuses on the electronics of the drives. I often asked myself why they were doing this, as the fuses could not cost 1/2 cent each. I have since found out! This is a little known fact that is not limited to hard drives alone unfortunately, but also incorporated into cars, electronics of all sorts, and everyday things that we the consumer use. This little known fact is called “built-in obsolescence”! This is a very little discussed problem in today’s society, but we all face it at some point or another.

waste-makers1.jpg
The is an excellent excerpt on this exact point in the book Waster Makers, published back in 1960. We have copied it below. This relates to deliberate changes that made items less serviceable.

Excerpt:

Beyond all these factors of quality debasement and by repairmen there were several objective factors about modern appliances that helped make them expensive to maintain and that helped increase the business volume of servicing agencies or replacement-parts manufacturers, and, in some cases, the manufacturers hoping to sell new replacement units. There were more things to go wrong. Those added luxury accessories that so delight copy writers were adding to the problems of products to break down. The rush to add extras on washing-machines in the form of cycle control, additive injectors, increased the number of things that can develop ailments. The Wall Street Journal wrote: “Parts and accessory dealers naturally are pleased with the added extras put on new cars.” They should be. I have two neighbors who bought station wagons in 1958. One bought a model with power steering, power brakes, automatic shifting, and power windows. The other—a curmudgeon type who doesn’t think that shifting gears and raising windows by hand are too much of a strain—bought a car without any of the extras. His years of ownership of the car have been relatively trouble-free. (And by spurring the extras he saved several hundred dollars at the outset.) The other neighbor who bought the car with all the extras moans that he got a “lemon.” His car, he states, has been laid up at the garage seven times, usually because of malfunctioning of the optional equipment. Replacement parts were costing more. The gizmoed motorcar was a good case in point. A creased fender that in earlier years could be straightened for a few dollars was now, with integral paneling” and high-styled sculpturing, likely to cost I $100 to correct. The wrap-around windshield was likely to last three to five times as much to replace as the unbent/ windshields that motorcars had before the fifties. Ailing parts were increasingly inaccessible. In their pre occupation with gadgetry and production short cuts, and perhaps obsolescence creation—manufacturers often gave little thought to the problem of repairing their products (or alternatively made them hard to repair.) Sales Management dominated and demanded that“products are not designed for service.”It was of steam iron that could be repaired only by breaking it apart and taking out the screws. Some toasters were riveted together such that a repairman had to spend nearly an hour just getting to the right part. This is to replace a fifteen-cent or a ten-cent spring. Product analysts at Consumers Union told me that air-conditioning units in automobiles were often cluttering up the engine compartment so badly that it took an hour or two to remove a rear spark plug. Built-in appliances—which were being hailed as the wave of the future had to be disengaged from the wall before repair work could begin. Many of these built-ins were simply standard.

Facilitating Repairs

Manufacturers often failed to provide in provide information that would facilitate repairs. Recently The Boston Globe protested that appliance manufacturers were getting so “cozy” with service manuals that customers seeking them got the impression they were “censored as if they contained obscene material.” The Electric Appliance Service News likewise expressed indignation on behalf of servicemen, or at least independent servicemen. It said, “Our mail is loaded with gripes daily from servicemen throughout the country lamenting their inability to obtain service manuals from certain manufacturers.” Often this coziness has sprung from the desire of the manufacturer to keep the repair business to itself and out f the hands of independents. The News charged that “some manufacturers do not make service manuals available to all independent repairmen and therefore it is almost impossible to make repairs easily and properly—and at a time-saving expense.

the_breakthrough_illusion_book_cover11.jpg
This exerpt is from the book The Break Through Illusion and is related ho how R&D was changed to be less integrated and more specialized, and how service-ability as well as manufacturability were reduced.

R&D was also separated from other corporate activities such as product development and manufacturing. In 1925 Bell Labs was organizationally separated from Western Electric “to permit more effective specialization in research and development. “R&D now became the first step in a specialized assembly-line process of innovation. According to the historian George Wise: “At subsequent workstations long that assembly line, operations labeled applied research, invention, development, engineering, and marketing transform that scientific idea into an innovation.”

As this process moved along, projects and products would simply passed over the transom from R&D to product development, from product development to pilot production, and from pilot production to manufacturing Once a project was handed on, the receiving group vas confronted with a fait accompli, their freedom of operation constrained by earlier decisions. For example, engineers working on the body of a car might design it in such a way as to make proper placement of the engine and steering difficult. The engineers assigned to steering and motor development would then change the design based on their needs. By the end of this process would be expensive and difficult to manufacture. Typically, this yielded results that were expensive and frequently of low quality, for example, the Ford Pinto and the Chevrolet Vega, cars that were designed as lemons.“

Conclusion

The consequences of all this were both profound and disastrous. The connections between R&D and production were irrevocably severed. New ideas and inventions were stranded in a “twilight zone” between R&D and production. American industry went from a system in which innovation and production were closely linked to one in which it became increasingly difficult to produce the research labs’ developments economically. Some companies, like DuPont, responded to the growing gulf between the R&D and manufacturing by creating internal “venture” divisions designed to turn promising R&D into new products or in cases into new businesses. But few of these new venture visions proved successful. For example, none of DuPont’s major new internal ventures or spin-off companies amounted to much. The reason for this was basic: new venture divisions simply added another intermediate level to an already overblown and unwieldy R&D bureaucracy. Here again; large corporations showed that they were oblivious to the need for more fundamental kinds of restructuring.

Post-Script

It’s interesting how little changes. The article below describes how Apple decided to use glass on the back of the iPhone 4 in a decision prioritizes style over durability. I don’t know how many people care about the back of their phones, but I would venture to guess not much. Glass has no other property that you would want to put in the palm in that it is not a good insulator (so the heat will come through the back of the phone), and it is a low friction surface, meaning the phone will be more prone to slip out of one’s hand.


Another case of Apple choosing style over durability.

http://theappleblog.com/2010/06/30/the-iphone-4-missteps/

On a second very popular Apple product, much was written about how much better the iPad 2 was than the iPad 1. People were amazed by how thin it was and how it now had tapered edges which felt great in the hand. However, little was written about how this would affect serviceability. It turns out quite negatively. ZDNet disassembled the iPad and essentially recommended that users never try to open the iPad 2. They gave the product a serviceability score of 4 out of 10. In addition to reduced serviceability, the durability of the iPad 2 was reduced over the iPad 1, with a much greater likelihood of the glass cracking than in the iPad 1. If publications continue to lightly cover aspects of durability and serviceability, companies like Apple will have the incentive to continue to not emphasize these aspects in their design.

http://www.zdnet.com/blog/hardware/ipad-2-the-teardown/11846


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.

______________________________________

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