Service Automation in Cellular Phone Repair

August 1995

Over the past ten years, the cellular phone industry’s service sector has transformed itself from a horse-and-buggy business to a high-tech operation of the electronic age. From an end user’s point of view, the improvement has been spectacular: service time was cut from weeks to days and finally to minutes. At present, a consumer who returns a phone to a properly equipped dealer can walk out with a replacement in twenty minutes or less.

"And that’s not the end of it," says Jack Noa, manager of operations for the cellular service division of Ericsson. "Give this industry a couple more years and there’s a good chance we’ll be exchanging phones even before the customers are aware that something is starting to go wrong."

The transformation of the industry’s after-sales function has been driven by unrelenting market demand for quick turnaround–and has been made possible by the introduction of highly specialized computer technology to upgrade its infrastructure and procedures.

Users and Carriers Want Rapid Exchange

Like personal computers and certain other high-tech products, cellular telephones have not only proliferated but have become occupational necessities for people in a wide range of fields. Regular users, such as medical doctors who rely on cellular technology to keep them in touch with emergency situations, are simply not willing spend days–or even hours–without a working phone.

In addition, the cellular business may be unique in having a second source of pressure for rapid exchange. Carriers, whose profit levels depend on high rates of use, are anxious to reduce to a minimum the amount of time a customer’s phone remains inactive. "The carriers," says Noa, "keep asking manufacturers what we’re doing to improve service even more. Their idea of a perfect world is one in which dead time doesn’t exist."

Responding to consumer and carrier demands, manufacturers such as Motorola, NEC, and Ericsson, committed themselves in the early 1990s to modernizing their cellular service operations. Turning to computer technology, all three firms installed a depot management system developed by Transnational Computer Technology (TCT) of El Segundo, California. Called SARA, the system has been designed specifically to manage all facets of service, repair, and remanufacturing.

"Here at Ericsson, we realized that it was either automate or lose customers," says Noa. "One of the best ways for us to compete was to have a very responsive and well-managed service infrastructure. We needed a computer system that could integrate information from many sources and make it possible for us to support an advanced replacement process–as well as helping us cut costs associated with handling returns."

Automation Transforms After-Sales Capabilities

In late 1992, Ericsson installed the new software at its central cellular repair facility, now located in Richardson, Texas. Besides managing activities at the central depot, the application was also used to coordinate efforts with Ericsson’s seven regional third-party service providers. According to Noa, the system has allowed Ericsson’s cellular division to take its after-sales capabilities to levels that would have seemed almost impossible a decade ago.

"A fully integrated depot management system," he says, "gives you ready access to information from many different environments. You obtain serial numbers, dates of manufacture, and revision levels from the manufacturing system. The shipping module tells you when a phone is shipped and when the warranty period starts. You get part numbers and prices from the inventory system. Interfaces with accounts payable and receivable, order processing, and so on give you additional information to complete the picture. From the time a phone is shipped, the system has all the necessary data to track warranty status and to support the whole process of exchange and repair."

As Ericsson installed the new system, it also took steps to reduce turnaround time. Cellular phone resellers were already providing consumers with loaners while repairs were made–but the industry was aware that the use of loaners has drawbacks. Most important, it requires an individual consumer to make two trips to the dealer. The user brings in a malfunctioning phone, gets a loaner, then must return to the dealer a few days later to pick up the original phone.

Additionally, the use of a loaner means that the consumer temporarily has a phone with a new electronic serial number. Either the user or the dealer, therefore, has to take the time to enter this information into the carrier’s system. Later, when the user comes back to retrieve the repaired phone, the process has to be reversed.

Moving to One-Step Exchange

Deciding that this method of exchange was too slow and cumbersome, Ericsson moved to eliminate half of the time involved by reducing everything to one step. The firm began offering dealers an exchange module and later a software that can transfer all the data from the end user’s phone to a model taken from the dealer’s shelf. Consequently, at participating retail outlets, the user’s phone can now be "repaired" in one trip–and the carrier’s billing system does not need to be notified of any change.

After collecting telephones from users, dealers forward the units to Ericsson’s central repair facility or to one of the third-party depots with whom Ericsson has cellular service contracts. At the depots, the information on each unit is entered into the SARA system, and the user’s warranty is verified and automatically transferred to the new phone. Meanwhile, as soon as a batch of returned phones is logged into SARA, a replacement batch is sent to the dealer. Normally, dealers receive new phones within 72 hours of sending out returns and therefore do not have to carry large exchange inventories. "And we’re improving," says Noa, "This April, 97.2 percent of our dealers received exchange phones within 48 hours."

All returns are ultimately sent to Ericsson’s Texas facility which assigns them to specific depots for repair. Work on the most recent models is done at Ericsson’s own depot because the firm wants to keep close track of possible early-life failures. Older models are regularly sent out in batches to independent service centers. These depots, located in seven different areas of the country, are on line with SARA and can enter into the system a complete record of all actions they take with each phone.

Incorporating Regional Repair Depots

One such regional depot is Auto Electric Radio (AER) of Fullerton, California, which has been in the service and repair business for 47 years. The 200-employee facility has long specialized in car radios, stereo systems and other electronic components for Ford and Chrysler automobiles. In 1988, the depot also started doing cellular work and now has a staff of 18 dedicated to cellular service and repair.

Each day, AER’s drivers pick up phones from dealers and distributors throughout much of southern California. When the phones arrive, technicians check with SARA to verify warranties. Covered phones are given a preliminary inspection and sent off to Ericsson’s main facility in Texas, while units to longer on warranty are repaired at AER. The great majority of the firm's cellular repair work, however, is done on the units AER receives regularly from Ericsson.

According to Noa, Ericsson’s efficient service network and close relationship with independent depots like AER is a direct benefit of computer technology. "Without a capable system, the logistics of all this would be practically unmanageable," he says. "Our phones have a return rate of slightly less than one percent–but given our national sales volume that translates to between 8,000 and 10,000 units per month. Imagine trying to keep track of those kinds of numbers manually, using traditional paperwork. It would be very difficult and very expensive."

Controlling Costly Credit Returns

Ericsson’s ability to keep track of each phone’s repair and warranty records has not only reduced service time–it has also helped the manufacturer cut after-sales costs. Three years ago, for example, credit returns of cellular telephones were a major problem. In the first quarter of 1995, however, the numbers had become negligible. For Ericsson, this sharp reduction of credit returns represents an annual savings of over $1 million dollars.

But Noa’s real prediction concerns cutting more time in the service process.

In the cellular telephone industry, consumer demand may soon alter the meaning of "advanced exchange." Responding to end-user insistence on swift resolution of problems with phones, manufacturers such as Lynchburg, VA-based Ericsson Cellular have turned to computer technology to upgrade service infrastructures and procedures. The results have been dramatic. From a consumer’s point of view, service time has been cut from weeks to hours–and finally to minutes.

"Many dealers will take back anything, no questions asked," Noa points out. "But the vast majority of our former credit returns should have been disallowed for various reasons. They were outside the approved time limits, parts were missing, and so on. SARA has helped us educate our dealers to screen products carefully before taking them back. Once dealers realized that our computer would catch improper returns, they were no longer willing to accept phones outside the scope of the authorized return program."

Additional costs cuts have been achieved by reducing numbers of payments for invalid claims. "Once we had the ability to track and verify each warranty," says Noa, "we were able to cut about $500,000 annually in claims payments that should have never been made." Cost reductions have also been achieved by minimizing errors in repairs. One of the most common repair mistakes, the use of wrong parts, has been all but eliminated because the computer system provides technicians with precise parts information for all models and revisions.

The Future of Cellular Service and Repair

Lower service and repair costs have helped reduce cellular telephone prices so much that some industry observers feel the phones will eventually become throwaway items that no one will bother to repair. "That's conceivable," says Noa, "and it would certainly make a large service infrastructure unnecessary. But it's much more likely that manufacturers will market both low-end and high-end models–phones with all sorts of special features. Some cellular companies will start marketing palm-top computers, others will have phone and palm-top combinations or some similar new item. If any of these high-end products catch on as workplace necessities, they'll need the kind of after-sales support that cellular telephones are getting now."

Although cellular service and repair operations have made great strides in recent years, Noa believes that the best is yet to come. "The technology for the next step is easily available. Cellular phones already conduct self-diagnostics when they are turned on. All we have to do is add an inexpensive chip, and we’ll have a telephone that can call an 800 number, all by itself, and talk to a computer.

"This is how it would work," he explains: "Even though the user believes his unit is working fine, the phone diagnoses a problem and calls the computer. The computer identifies the phone by serial number and notifies the depot to send out an exchange unit by overnight delivery. The following morning, the owner of the phone will see an express driver walk into his office, hand him a new phone, and walk off with the old one. The user won’t have to go anywhere, won’t have to wait for anything. Exchange time will be down to zero."

Noa believes that this method of "proactive exchange" will become a reality as soon as one cellular manufacturer decides that it has widespread consumer appeal. The rest of the manufacturers, he says, will fall into line to stay competitive. "It'll happen within a few years," he predicts, "because our industry has dedicated itself to providing the best service possible. Zero exchange time is the inevitable next step."

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