Cinderella shall come to the ball

There are several Cinderellas in manufacturing. One, all too frequently, is plant and machinery maintenance; another is managing returns; yet another is the product service and maintenance business – the after-market. And while it’s a fact that part of the reason for their lacklustre status is, well they’re not very exciting, it’s also the case that all of these can yield considerable benefit to the bottom line, customer service and your brand. The first two are primarily about keeping efficiency high and costs low; the latter, though, is about realising what for some could be a substantial opportunity for either direct or indirect market expansion, welcome unbudgeted growth and profitability. Why could spares business be a big deal now? Several reasons. Everyone knows there’s money to be had from servicing products long after they leave the factory gates – look at the automotive sector. We also know that while margins on original equipment are reducing, those for spares are not only holding up, but at a level often several times greater. Hence the scale of third party generic component manufacturers. However, hitherto the accepted default model has largely been one either of aggregation and outsourcing through distributors or, bluntly, laisez faire. Most OEMs don’t seem to have realised the value of the intellectual property they possess in the form of their documentation. As John Snow, vice president of marketing for software vendor Enigma, which has a heritage of document management in the aerospace and defence sector, observes “They think of it as a cost of doing business.” Also, it’s what’s made sense for manufacturers, who have been, after all, forced to become tightly focused on economic production and shipping out of finished goods. And it’s made sense for users too, who want spare parts to be easy to identify and multi-source locally, with minimal lead time and/or penalties for stocking. Hence also the numerous thriving MRO (maintenance, repair and operations) centric distributor businesses serving process plants, factories, service and repair shops, garages, whatever. Crumbling barriers to entry But with the coming of the web and associated data publishing tools, content and catalogue management technologies and more affordable application integration IT – all three – the old barriers to bringing more, even all, of this in house are on the point of crumbling. Organisations like Perkins Engines, Rolls Royce, GE and MG-Rover are now proving it. And not just the big boys; some of the smaller ones too. The point is that even for an SME build-, configure-, or engineer-to-order manufacturer – where there may be very few standard products – revenues from the after-market could now be yours, or at the very least managed and directed more effectively to your distributors, as opposed to competitors or third party component manufacturers. The scope of the potential reward is linked broadly to the complexity, criticality and value of the original products, their longevity and remoteness from the manufacturer/distributor and/or their mobility. The higher any or all of these are up the scales, the more users’ eyes can be tempted away from original manufacturers and competitors’ attention attracted. Those most likely to gain are manufacturers serving the automotive, aerospace and defence sectors, and those making industrial and consumer rotating and capital equipment (machines, engines, etc) for use around the world and such like. So what technology and systems do you need? What level of manufacturing IT is a prerequisite? What’s it going to cost in cash and effort? And what ROI (return on investment) might you expect? Turns out that while it’s early days, there are several technologies that could be a match for more manufacturers than you might think. And by applying the old ‘horses for courses’ rule, depending on your IT landscape, nerve and capabilities, the cost/benefits could now be favourable. Digital cataloguing technology is a prerequisite; then there’s the managed website and associated services; if relevant, distributor/supplier management software probably built around your supply chain fulfilment IT; and you need hooks into ERP and probably design and your change control engine. The latter is the bit that exposes your as-designed, as-built and as-maintained data: most important in providing the data source linking the would-be user, wherever he is, with what he’s trying to find. Beyond that you need to consider the presentation format – getting it in a view that makes most sense to would-be users. Web publishing IT firm Reqio offers Catalogue Manager for information entry and, most important here, retrieval. The software’s parametric search engine can help as long as “manufacturers have described that information in appropriate detail,” says chief technical officer Mark Johnson. His company’s tool can do links out to applications, like ERP for price look-ups, stock availability and ordering, so CAD, for example (to allow users to work with diagrams driven by BoMs (bills of materials)), ought not to be too much of a stretch – although it hasn’t been done yet. Then again, MRO Software, the maintenance management and latterly web-based procurement IT company, has a similar illustrated parts catalogue tool, this aimed at maintenance engineers on plant, and designed to present 3D exploded drawings showing which labelled parts fit where. That too could be driven by the equipment as-built BoM, according to MRO marketing director Johan Arts. “It’s never been applied for OEMs or website use, but it wouldn’t be a big job to develop it.” And since it also has the functionality to look at inventory levels and raise purchase orders it’s there or thereabouts. It’s not out of the box yet, but it’s close. As for the cost/benefits, look at some that are doing it. We reported recently on TransBus International, the JV between specialist vehicle manufacturer Mayflower and the Henley Group, which owns bus body builder Plaxton (MCS, November/December 2001, page 46). That organisation is seriously building its spare parts business by making its own, very non-standard parts easiest to source and obtain from the point of use (garages around the world). Its solution – already in use internally by regional sales offices – involved producing a web-based parts catalogue (software from Information Engineering) that was not only customer-sensitive on price, browser accessible and secure (by VPN: virtual private network), but also low on bandwidth (using Citrix, so quick and cheap to implement and use). What’s really clever is that user engineers that typically don’t have access to part numbers and ID can search it using visualisation straight off the firm’s CAD drawings, in turn driven by calls to the BoMs from TBI’s back end ERP system. And it gives them pricing, availability, ordering and shortly also order tracking and invoicing. £18 million to £32 million It wasn’t cheap: costs for that system, according to Anthony Pursey, who heads up TBI’s spares business unit, were around “half a million [pounds] in terms of software, the development, management time, the hardware and the networking,” plus £6,000 per month for network provision. But the returns are already absolutely worth that: it’s transformed what was an aggregate £18 million parts business to £32 million in 18 months. Perhaps closest to ‘out of the box’ here is software from Enigma. Its ongoing implementation at diesel engine manufacturer Perkins Engines (MCS, January 2001, page 7), now just four months away from completion, is an excellent example of what can be done. The firm makes around 300,000 engines a year (1,000 types and more than 30,000 part numbers) for agricultural, marine, power generation and materials handling applications. There are 7 million units installed across an estimated 160 countries, and support is provided by 4,000 distributors and service centres. Big numbers! For the last 18 months Perkins has been moving away from its old six monthly CD catalogue publishing cycle – which was inevitably always out of date and could only provide engine number and parts look-ups – to Enigma’s XML-based 3C real time web publishing IT. The goal is not only on-line spare parts ordering from illustrated, and therefore easier to use, parts catalogues right on users’ web browsers, but also helping dealers’ businesses in terms of inventory optimisation, with recommended stock lists being generated based on the engines logged in the territories. Now that’s smart – and within the grasp of many if you have appropriate business intelligence and reporting software linked into sales. You can also take it further: Perkins’ solution offers recommended associated components pick lists for users ordering spares, as well as error avoidance based on automatic comparisons and historical checks. And the firm is already thinking about other services, like engine diagnostics over the web. Ian McGrady, Perkins’ e-business project director reckons the firm will see revenue growth of “5—10%” from all this, as well as softer benefits like savings on CD, bulletin and paper catalogue publishing and help line support. Rolls-Royce is another, with its AeroManager .com portal (MCS, January 2001, page 4) now providing not just engine manuals, parts lists and so on online, but also more recently, fault isolation, maintenance and repair manuals. And it provides for higher level change control, as well as the mechanism for temporary revisions between formal release times. The point: MRO dealers and users like an easy life – one source of inclusive, up to date information, bulletins when they apply rather than when the revision period is up – and the resulting confidence in their ability to maintain high availability of the equipment for which they’re responsible. Give them that and they’ll come back time and again. Treated as TBI, Perkins and Rolls-Royce have done, your ‘documentation’ becomes a route to additional short and longer term revenue achieved by maintaining a good relationship with your customers long after the original salesperson has walked away. All that said, it’s clear that this still requires some effort, imagination and cross-company thinking and determined project leadership. For most there isn’t an instant packaged solution … and my guess is they will only start to emerge slowly. Manufacturers’ web projects are fragmented: opportunistic developments – anything from direct and indirect materials procurement, to collaborative supply chain interactions at various levels, as well as sales. Most involved in web sales developments are still struggling with digital product catalogues, content management and how to participate and integrate with private web exchanges, etc – although emerging Web Services will ease the latter. It’s also the case that only manufacturers that can see a direct competitive advantage from web work, with relatively fast and worthwhile ROI – or those being driven by their customers – are doing it. With even the most successful web exchanges, like SKF, Timken and Sandvik’s endorsia.com, achieving transaction rates no better than 100,000 per month total, many rightly still see ROI even here as a moot point. That being so, vendors aren’t likely to rush at what they see as at best embryonic demand for a spares connections market. Nevertheless, it can be done. Key points to remember are that the end game is not simply about making spares and service kits available by part number or prefix in a web catalogue: that’s the easy bit already being done by your existing spares competitors. You need to offer easy parts identification appropriate to your markets, through exploded parts diagrams, Explorer style hierarchies and associations going back to goods manufactured many years ago, as well as visibility into stocks, equivalent parts lists, ordering, automatic promised delivery dates and order tracking. Then there’s options for ‘how to’ and diagnostic information on top. Your manufactured goods are probably assemblies of others’ branded components: the question is who is easiest, fastest, cheapest and most expedient to work with. Remember Cinders? Who exactly has the contract for parts and service on your glass slippers?