As anyone who has frantically thumbed through the instruction manual for their video recorder knows, after-sales support matters.
When the equipment in question is an aircraft engine, and the instruction book runs to 100,000 pages of technical data, delivering the right information where and when it is needed becomes a big headache.
For decades, the only realistic way for suppliers of complex industrial equipment to support users was through vast paper manuals, backed by site visits from field engineers and possibly telephone call centres. Digital information technologies opened up new ways of delivering technical content. The CD-ROM became a popular way to store large volumes of data in a convenient, portable format.
The internet, with its potential to instantly deliver dynamic content, and the arrival of mobile technologies, promise to take things to a new level.
The key to unlocking the content goldmine will be XML-based technologies that can take a huge amount of technical data and transform it into a structured form that can be shared across multiple enterprise systems.
And according to some commentators, technology cannot ride to the rescue of the after-sales services soon enough. Dr Michael Hammer – a former professor of computer science at Massachusetts Institute of Technology and now a respected corporate strategy pundit – is damning about the ‘primitive and antiquated’ processes still commonplace in some industrial sectors.
The reason, claims Hammer, is cultural. He believes many equipment suppliers see their ‘real’ business as designing and selling products. Once the sale is made, providing support is seen as no more than a necessary evil, undertaken merely to comply with service agreements.
Few executives have a sufficient grasp of the after-sales arena, Hammer argues, because most ‘grew up’ in another part of the business. ‘If they can’t understand it, they – defensively – assume it isn’t important,’ he says. ‘It’s not uncommon for post-sales support work to fall between the cracks and be assigned by default to the sales organisation, further burdening already busy and ill-prepared staff.’
If Hammer is right, the equipment after-market is starting from a low threshold. But the commercial benefits of a more efficient support chain are beginning to emerge.When a manufacturer sells a complex piece of capital equipment, it enters a relationship with its customer that can span decades. The machine, engine or other asset will need routine maintenance and – more than likely – repairs and spare parts, too.
Spares in particular represent a potentially huge source of revenue for equipment manufacturers. Profit margins on spares are typically between 50% and 70%, compared to a mark-up of 25% at best on the sale of the piece of equipment itself.Strengthening the after-sales relationship with the user puts a manufacturer in pole position to capture the lion’s share of these lucrative spares sales, in the face of competition from third-party distributors.
As in other areas of e-business, the big players are setting the pace.
In 1999 Jack Welch, chief executive of General Electric, laid down the gauntlet to each of the US industrial giant’s operating divisions. He told them to imagine an e-business strategy that could drive their own GE company to the wall in the hands of a competitor – and then to make sure that they did it first.
In the case of GE Aircraft Engines (GEAE), that meant getting its after-market support process out of the realm of ink and paper and onto the internet.
Around $3bn of GEAE’s $11bn annual revenue comes from providing parts and services to customers. Those customers include airlines, for whom a non-working engine means a grounded aircraft and a big commercial problem.
GEAE’s strategy was to offer customers a central technical support and e-commerce portal that would help them maintain the company’s engines and order spare parts more easily.
Every engine supplied by GEAE comes with about 100,000 pages of technical information, including illustrated parts catalogues, manuals and standard practice documents.
With the help of technology from Enigma – one of the few genuine support chain specialists – GEAE assimilated its vast libraries of information into searchable web-based applications. The engine manufacturer now gives users personalised access to its customer web centre, allowing them to view and search for only the technical content relevant to their needs.
Another advantage of the web-based system for GEAE is the ability to get service bulletins out to customers without the delays and uncertainties of paper-based systems.
Service bulletins are crucial updates sent by GEAE to its customers, advising them of new repair procedures and details of the parts needed to carry them out.
By alerting them directly by e-mail – and enclosing a web hyperlink to all the relevant information – the manufacturer can be certain of reaching the people who need to know.
GEAE, its sister-company GE Power Systems, as well as Perkins Engines, Pratt & Whitney and Siemens are among the big-name manufacturers that have adopted support chain e-business technologies.
But despite the interest of such big players, the after-market has, until now, languished in the shadow of other areas of e-business strategy.
Pocket of innovation
Many companies have made procurement the focus of their internet strategies, preferring to concentrate on driving down the cost of supplies coming into the business rather than the other end of the process.
Martin Atherton, an e-business analyst for research specialist Datamonitor, says the few technology specialists operating in the after-market area have the playing field to themselves – at least for now.
‘It is an interesting area; one of those pockets of innovation you find scattered around the B2B sector,’ says Atherton.
‘To some extent, the activity of these specialists is plugging a gap left by the more mainstream e-business companies.’
Graham Wylie, European marketing manager for Enigma, admits the hullabaloo around e-procurement has, to some extent, made the after-market message tougher to get across. ‘It’s true there are some quick gains to be made through e-procurement – if you were very bad at procurement anyway,’ says Wylie.
‘Businesses are moving beyond the idea of using web-based technology just to cut costs. By making their support chain more effective, companies are adding something to their operation that benefits themselves and their customers.’