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New Business Realities Call for New Service Approaches September 2001 Recent moves by the giant Panasonic Services Company of New Jersey may offer a glimpse into the service industry’s future: more consolidation of facilities, use of assembly-line refurbishing, and an increasing reliance on new-generation technologies to streamline operations and support rapid change. The most notable of Panasonic’s moves has been the installation of a new service management application across 30 facilities throughout North America. The deployment, completed this summer, is one of the largest implementations of a distributed client-server system using Oracle’s Replication Technology. Panasonic’s embrace of new-generation technology stems directly from a need to revamp long-established service procedures because of changing business conditions in the consumer electronics industry. On the one hand, since the mid-’90s, consumer electronics manufacturers have had to respond to ever-increasing consumer demand for quicker and more convenient service. On the other hand, with the retail prices of many products at $100 or even lower, it is no longer cost-effective to repair such products in the traditional manner. A $100 telephone becomes a throwaway item if its manufacturer cannot find a way to repair it for considerably less than $90 an hour. A Fresh Look Faced with the need to provide effective service at a lower cost, consumer electronics manufacturers began taking a fresh look at their service operations. At Panasonic Services Company, such a review process led service executives to commit themselves to a number of significant changes, including greater consolidation and the introduction of assembly-line techniques that can significantly reduce per-unit refurbishing costs. The company built several new assembly-line plants to which it could funnel most of the company’s product lines for remanufacturing. It also consolidated the repair of digital products into a single facility, eliminating duplication of the expensive tools and the special training for technicians required for such repairs. To support these and other changes and to enable service management to respond quickly to evolving requirements, Panasonic needed up-to-date technology. Consequently, as it was building its new plants and consolidating activities, the service company also moved to replace its 13-year-old mainframe system with a highly specialized application, called SARA (Service and Repair Automation). "It was a key step," says Peter Schepis, director of IT at Panasonic Services Company. "To move ahead successfully, we needed a service management application that was much more flexible and less expensive to use than our legacy mainframe system." Schepis cites inadequate availability as one example of the many frustrations the company had been experiencing with its existing system. "There was only one mainframe, " he explains, "and it was located here on the East Coast, while our operational facilities were spread across many locations, including Mexico and Hawaii. "Before long, system availability became a serious business-operation issue. We needed to support operations in different time zones and on different holidays, and at some refurbishing centers, we needed to support multiple shifts. Our legacy mainframe system simply could not address these growing and changing demands." By contrast, says Schepis, the new SARA system and databases are running on local servers that are available to Panasonic repair and refurbishing facilities around the clock, every day of the year. "System availability has ceased to be a problem," he adds. "Our facilities now enjoy as close to a 24x7x365 environment as is possible, without extensive IT costs." The new system also gives Panasonic the flexibility to introduce innovations quickly, such as the product exchange program recently implemented at its new McAllen, Texas, refurbishing facility. "We had set up three centers to refurbish products at a relatively low cost by using assembly-line, mass-production methods," Schepis says. "Then we introduced a large-scale customer exchange program at McAllen that utilizes these refurbished products. "The exchange program makes good sense for us," says Schepis, "because it has the advantage of cutting service costs while maintaining our commitment to customer satisfaction. The program will provide the customer with a refurbished product within three days of receipt of the customer repair unit. In some cases, we also will enable customers to participate in an advance exchange process so they can get the replacement unit even before we receive the customer repair unit. And, of course, all of this includes the transfer of existing warranties and service contracts to the refurbished unit." New System Eliminates Old Hurdles In the past, enhancing the legacy system to deal with new activities of this type was expensive and time-consuming. But with the new technology, this hurdle no longer exists. This summer, for example, Panasonic was able to add a new module to its service management application and have the McAllen customer-exchange operation ready to run in just under a month. "What else that really pleased us at McAllen," says Schepis, "is our capacity to handle large volume. The volume that has been going through the facility every day is much greater than we had anticipated. But our new system has been up to the task, handling these large quantities very successfully. "The bottom line," Schepis adds, "is that we now have a system that helps us implement important business changes quickly and effectively. We could see that establishing a consolidated return operation at McAllen was a good idea. We knew it would improve service by giving customers a working product very quickly. And we knew it also would reduce our costs by cutting down on expensive repair work and letting us feed refurbished units back to the customer. But good ideas sometimes are very difficult to implement the way you want to. In this case, relying on advanced technology, we were able to get the results we were looking for." Schepis acknowledges that installing a new technology system like SARA represents a considerable investment for Panasonic Services, but he believes that the move makes excellent financial sense. "Because this system will serve so many of our needs so effectively, we expect it to pay for itself within three years," he says. "From an IT perspective," Schepis adds, "moving to the new system also makes good sense. First of all, SARA is completely Oracle-based, which means our own staff can use Oracle tools to enhance the system and to extend its reporting capabilities. With standard tools, we don’t have to depend on the vendor to adapt the system to our evolving needs." Service Operations Integrated Under One Umbrella "Second," he says, "the new technology allows us to be much more efficient because all parts of the service process are now integrated under one umbrella." Previously, Panasonic Services relied on five different applications using disparate technology platforms to handle the various links in the service chain. Now, all service functions from depot repair and refurbishing to claims management, authorized service management, and contracts are part of the same software package. "And it’s not just the functions within service that can talk to each other very easily now," says Schepis. "They’re also connected to Panasonic’s ERP systems and to our parts distribution system. If a technician needs a part, for example, and SARA finds that it’s not available within that technician’s facility, SARA automatically places an order to our parts distribution center. The parts distribution center then ships the part, and upon receipt of the part, SARA automatically allocates it to that particular technician. Total integration makes everything very seamless and efficient." Schepis says that Panasonic worked with SARA’s developer, Transnational Computer Technology (TCT) of El Segundo, California, to add several dimensions to the vendor’s product so that it would cover Panasonic’s complex set of needs. "We did a thorough study, a gap-fit analysis, to see what the various service management systems could provide us," he says, "and SARA came the closest to giving us the features we wanted. Our staff then began working with TCT developers, and before long, we had an application that was customized and configured to our specific requirements." Panasonic has continued working with TCT to customize SARA for the special needs of its different divisions. Currently, the application is managing service not only for the Panasonic Consumer Electronics Company, but also for the Panasonic Broadcast and Television Systems Company and the Panasonic Digital Imaging Company. At TCT, the vice president of product development, Ravi Kumar, says that Panasonic’s assistance in enhancing SARA was an invaluable step in the software company’s painstaking process to develop an application that was capable of managing the complete spectrum of service functions for large corporate clients. "We started building service management applications in the 1980s," Kumar says, "for customers such as NEC and Motorola. At first, we developed several different systems, each one dedicated to handling a particular set of service functions. We had a help desk system, a field service system, and a depot management system. But then we made one of those all-or-nothing decisions that determines a company’s future. We decided to drop the piecemeal approach and commit ourselves to developing a sophisticated total package that would integrate all aspects of service operations." Competition Pushes Higher Levels of Customer Satisfaction Driving TCT’s efforts toward the creation of this umbrella software package was the company’s sense that the service side of the consumer electronics industry was undergoing profound changes. By the late 1990s, TCT could see that service operations at many manufacturing companies were being transformed from a financial write-off that got little attention from corporate executives to a key means of retaining a competitive edge by providing high levels of customer satisfaction. "As manufacturers began competing for customers by offering better and better service," Kumar says, "they began to rethink just about every aspect of the service business. But although service management at these companies could see the advantages of various innovative approaches, they often were unable to implement the desired changes because they didn’t have the technology to support them. "We saw what was happening and invited service people from leading manufacturers to talk to us about what they wanted from a service management application. What we found," Kumar says, "was a keen interest in tracking and rationalizing all aspects of the service process. Companies needed the ability to track enough information to quickly give them valuable decision-making metrics such as cost to repair, turnaround time of repair, technician productivity, failure rate, and much more." Management Seeks More Decision-Making Data By the end of the 1990s, according to Kumar, service management at most consumer electronics companies wanted service applications to help answer the following questions:
"Service managers’ needs for decision-making data guided our development team in two ways," Kumar says. "On the one hand, we wanted to make sure our application would provide answers to the current lists of questions. But it was also clear to us that many other types of needs would come up as the service side continued to become more dynamic and more important. Consequently, we decided to focus on flexibility, adaptability, and above all else, on building a generic system that could be easily adapted by any of our customers to new business requirements." Historically, New Technologies Serve Service Last In committing its resources toward developing such a system, TCT was gambling that manufacturers of consumer electronics products soon would be ready to invest in new technology for their service operations. "It looked like a good bet," says Kumar. "Historically, there’s been a clear pattern in the way manufacturers have adopted technology. About 25 years ago, they started automating their financial and manufacturing systems and the other main parts of their businesses. Service operations were the last to be automated—in some cases, as much as 10 years later." "Then, when these companies upgraded to client-server and Internet technologies, they followed the same approach. After a year or two, all their ERP systems had been brought up-to-date, but their service systems were left with the old legacy technology. Still, we were convinced that most manufacturers would eventually have their service divisions adopt emerging technologies, and we wanted to have a sound product available when they were ready to make that move." Creating such a new-generation product has been Kumar’s goal, since he assumed control of technology development at TCT several years ago. "We were a small company seeking success in a niche market," he says. "If we had an advantage, it was that we could focus entirely on service. When we put together our development team, it had only two kinds of individuals on it: technologists and experienced service people who knew the "ins" and "outs" of all phases of service operations. "Fortunately for us," Kumar adds, "this team didn’t change much over the years. That’s fairly unusual in the software business, and it really helped us by giving our development process a great deal of continuity. For many people on the team, it became a matter of pride: We wanted to produce an application that service industry insiders would immediately recognize as a very competitive system." New Generation of Business Software Puts Customers First Kumar feels that TCT’s approach to building its service management product also reflects fundamental changes in the way most software houses think about business applications. "For years, there was a feeling that the best way to enhance a product was to introduce more technical bells and whistles," he says. "But gradually, that attitude changed. Now, the ideal product isn’t the one with the sexiest features—it’s the one that does the best job as a business tool." "Ultimately, what guided the final stages of SARA’s enhancement for Panasonic," he says, "was the input of Panasonic people who had service business expertise as well as a strong technical orientation. This not only enabled them to resolve functional issues very quickly, it also kept everyone focused on SARA as a business tool that would be used primarily by the company’s non-technical people. "I’m a technical person myself," Kumar adds, "but one of the things that really pleases me is that you don’t need to be a programmer to introduce changes into the system Panasonic has installed. Anyone familiar with the way it works can adapt it to new requirements. That’s the kind of flexibility that marks the new generation of business software. The technical advances are there, the engines are more powerful, but the emphasis is always on making sure that the customers can easily drive the system where they want it to go." |
