Warranty Analysis Software:
Skeptical buyers and long sales cycles can be overcome with relevant demos using a customer's own data.
Warranty software is something that every manufacturer needs but few want to buy. Most decided years ago to write their own claims processing software, and to make do with whatever spreadsheet, database, and reporting software they had laying around when it came time to analyze the data.
It's not as if warranty software companies are competing with each other. Usually, their arch-rival is the sheer inertia of the installed base of good-enough homegrown software that took years or perhaps even decades to perfect. The software companies compete only after a company chooses to buy an application instead of writing their own. But if it ain't broke, and if it will take additional years and perhaps a few hundred thousand dollars to improve, why fix it at all?
Attensity Corp. calls itself the applications company for unstructured data. Last week, the company announced a breakthrough of sorts. No, it wasn't a new product. Instead, it was a new customer, which amazingly took only a few months last year to decide that Attensity Warranty was right for them. They probably would have done so faster if not for all the intervening summer vacations.
Six Months from Demo to Deployment
The NACCO Materials Handling Group Inc., makers of the Yale and Hyster brands of forklifts, handtrucks, and lift trucks of all sizes and shapes, first saw a demo of the Attensity Warranty system in June, and had agreed in principal to a purchase by August. By November, it was in limited deployment and last week the companies jointly announced the agreement.
Ryan McLawhorn, the quality improvement manager at the NACCO Materials Handling Group, said the company had almost given up on its quest to add analytics to the homegrown warranty claims processing system it had used for years. One package was great for reporting, but took a long time to process queries. Another did both those well, but cost more than NACCO was looking to spend. And still another analytics package wouldn't mesh well with NACCO's homegrown AS/400 software, and would require major changes to the way claims were processed.
The NACCO Materials Handling Group (NMHG) makes everything from the handtrucks used in retail stores to the container-handling trucks used at ports and shipping depots. It's comprised of the Yale and Hyster brands, which NACCO acquired back when it was still known as the North American Coal Corp. Besides the coal mining, which is still an active unit and is actually a very profitable part of the company, there's also a NACCO Housewares Group that manufactures kitchen appliances under the Proctor-Silex and Hamilton Beach brand names. But NMHG accounts for the bulk of the parent's total revenue.
NMHG sells through independent dealers, who most of the time also perform the required warranty work. However, sometimes a few of the big customers such as the Detroit passenger car manufacturers want to perform the warranty work themselves, which they then bill back to NMHG through the independent dealers. But even after the warranties expire, many forklift owners still rely on the local dealers for parts and service.
Warranty Work Order
When warranty work is required, dealers typically send out a field technician who opens up a work order. Most times it's done on paper, although some of the technicians are now using laptops. Although the size of the vehicles dictates that most of the warranty work be done on the customer's premises, the nature of the paperwork and the terms of the warranty are very similar to those seen with passenger cars, except the warranties are measured in hours of use rather than in miles driven. McLawhorn said NACCO's standard warranty period is one year or 2,000 hours, whichever comes first.
As with most auto service work orders, the work orders used by NMHG have the typical sections for listings of the parts replaced and the time spent doing so. It also has a comments section where the technicians typically write details about what they did and what they found to be the underlying problem. Back at the dealership, all this data is input to a warranty claims management application that NACCO's IT staff wrote themselves. Each dealership is connected as a terminal on an IBM AS/400-based system that sits back at NACCO's Greenville, North Carolina headquarters. Most of the routine claims are paid automatically, but anything unusual is given a once over by a claims processing clerk.
For many years, most of that warranty claims data just sat there after the claim was processed. Sometimes the data was exported into an Access database or into an Excel spreadsheet for some basic analysis. The cost of warranty was computed as a percentage of sales, for specific models, and for specific plants. But it never got too sophisticated. Engineers also took a look at it. When recurring problems were suspected, they could go in and manually read all the claims to see if they could detect any kind of pattern. But it took a lot of time for them to do so.
"So that brought NACCO several years ago to the point where we asked how can we use all this data to drive improvements with our suppliers, production facilities, and engineering people," McLawhorn said. "We knew this data was out there, but we wouldn't know what caused a problem without doing a lot of manual reading. So what we decided to do was look at applications software."
Competing with Inertia
NACCO brought everybody in. McLawhorn listed a bunch of names, including some vendors that are less about warranty in specific and more about analysis in general. Each of their analytics packages did the job required, but McLawhorn said he felt they were not doing it much better than NACCO's own homegrown Excel and Access analysis and reporting software. Some did a little better, but they cost a lot more.
Then along came Attensity.
"Last year, some of our people got a hold of Attensity, and we had them come in," he said. "What we liked about their software was the ability to use text mining. We needed a way to manipulate all of these comments, and all this data written in by the technicians." Sometimes it was in code and other times its grammar needed improvement, but most times the field technicians were accurately pinpointing the cause of a given failure. "A lot of time it's in there, but it's buried."
McLawhorn said he was initially quite skeptical about Attensity, having sat through the other presentations which had failed to impress either him or the IT staff. "Then Attensity showed us how they can take the large amount of data that we had been reading through and group it," he said. And they didn't just show them in theory. They used actual NACCO warranty data from one month last year to make their point.
During the first presentation in June 2004, Attensity explained how their system works, and how it parses and analyzes sentence structure to find the words that matter most. But they used examples from industries such as farm equipment, construction machinery, and passenger cars to make their point. To follow up and make the presentation more relevant, Attensity requested and received a month's worth of actual warranty data from NACCO.
Sold Them on the Spot
"I think it took them a couple of weeks or a month, but then they came back and showed us exactly what they could do with the software. And it sold us on their software on the spot. It was exactly what we were looking for," McLawhorn said.
"They were able to show us examples with our own material," he added. "And that was the selling point of the demonstration. Without that, I don't know if we would have gone with Attensity (or anything.) We really hadn't seen anything we liked."
Helena Winkler, Attensity's vice president of marketing, said it was important for Attensity to move the discussion from the theoretical to the practical -- from analysis of somewhat similar products to analysis of the prospective customer's own products. "It can be a big eye-opened for people to see their data that they understand and relate to, and have even read," she said. "And then in a meeting scenario, they'll see connections, patterns, and trends that they never saw before, even though they're very familiar with that data set." She said it's happened before with other customers. Most times, the meetings go way over their allotted time because the customers are so excited about what they found hiding in plain sight, and they want to see more.
Winkler said it was very easy for Attensity to take its software and make some configuration changes to the knowledge library to address NACCO and forklifts versus the kinds of vehicles manufactured and sold by customers such as Deere & Co. Attensity has now widened its automotive focus to include "land vehicles and automotive manufacturing," but she said there's no reason the company's warranty software couldn't find a home in the computer or aerospace industries too.
"It's truly just a very small amount of configuration work on our side to set up the knowledge library to specifically address their systems and subsystems and components, as well as their 'industry-speak,' if I can use that analogy," she said. "There are probably some terms or abbreviations that would be specific to airplanes or laptops."
A Thousand PowerPoints
If picture's worth a thousand words, then perhaps a demo using the customer's own data is worth a thousand PowerPoint slides. Back in the July 21, 2003 issue of Warranty Week we wrote about PolyVista Inc., a Houston-based business intelligence software provider that started out analyzing the contents of a supermarket basket and ended up looking for patterns in the warranty claims data of Hewlett-Packard Co. It happened because the people watching a demo recognized a pattern in their own data.
During a demo of its software at a tutorial put on for employees of what was then called the Compaq Computer Corp., PolyVista combined the PC maker's call center and warranty data, and related it back to both service and part requests. Bob Ford, PolyVista's vice president of technology services, said he showed the group that there was a direct relationship between warranty costs and customer satisfaction. As spending increased, customer satisfaction rose. As spending decreased, customer satisfaction fell. Ho hum.
Then Ford told the group that he could use the PolyVista software to find "interesting intersections" in their parts data, such as how he found that 80% of the time a modem was replaced in a particular unit, the keyboard also was replaced; but how only 30% of the time that a keyboard was replaced was a modem also involved.
"Somebody in the room knew the business," Ford recounted. "And he said, 'Bob, look at the model number. Those are laptops. In order to replace the modem, you have to go through the keyboard.'" They correctly surmised that perhaps the service techs in the field were damaging the keyboards while replacing the modems. And after the class was over, they used the system to narrow it down to one service provider who was doing much of the keyboard damaging. His students asked their design engineers to look into changing the mounting of the keyboard, and asked their product people to distribute better instructions on how to remove keyboards without damaging them. Needless to say, PolyVista scored a new customer.
Aaron Nielsen, president and CEO of a Canadian warranty software startup called BlueRealm Solutions Inc., has spent most of the last 27 years in one corner of the warranty industry or another. He said on the one hand he's not surprised to find that potential customers are initially skeptical, and on the other hand they turn into the software developer's best salesmen once they see the benefits in real terms.
"The warranty industry employs a lot of pragmatic-type people," Nielsen said. "They have been reluctant to try new innovations. And there hasn't really been a lot of innovation and development in this space." So when there really is something innovative to see, that skepticism is a natural first line of defense.
When they see their own data up on the screen and not some theoretical company's, they can instantly see if the promised innovations are real or not. If they see it, they're instantly converted. If not, well, they didn't really believe it was possible anyhow. But even if they become fanatic internal advocates for the new software, there's still usually others who need to be convinced. That's the nature of warranty: it touches many things throughout a company.
"Ultimately, they're coming in and trying to replace the heart of a company's organization," Nielsen said. "I think a lot of times the software companies come in and don't understand the interactions with the parties that are behind the scenes. So in the case of selling to a warranty administrator, a lot of times we found it's not the warranty administrator themselves that makes the purchasing decision. Suddenly you're having to convince three or four different parties that this is a valid solution."
McLawhorn said NMHG has been using Attensity Warranty since November. At first, NACCO also was experimenting with the software using a month's worth of warranty data, giving the staff a chance to become familiar with how the system works. Then in December they loaded the last four year's worth of warranty data into the Attensity system, so they can begin performing historical reporting. They've bought a five-seat license, of which four have been deployed and one is planned for the European operations (which use slightly different codes).
The system was put to the test fairly quickly in December when a suspected pattern of failures arose with hydraulic pumps. Before the Attensity system went in, McLawhorn would have had to make some database queries using specific part numbers, and would then have had to go read those claims that matched the particular search term. After Attensity, all he needed to do was search for hydraulic pump and some other descriptions.
Actually, McLawhorn said that through most of last year he had been delegating the bulk of the manual claims reading work to a young project engineer he'd hired right out of college. Now that engineer is doing much less reading of claims, and has been freed up to perform tasks such as verifying test data and engineering drawings. "You're able to use people in more productive ways," he said.
Now McLawhorn is trying to put those sorts of time- and money-saving anecdotes into a formal quantitative report for senior management. They know the system is better now, but management wants to know how much better -- how much money is being saved given how much was spent. Perhaps warranty professionals aren't the only skeptics in the typical corporation?
Warranty Chain Management Conference Approaches
It may sound far off, but the opening night for the Warranty Chain Management Conference in San Francisco is only five weeks away. Registration forms may be downloaded via the following link: www.warrantyconference.com/previous-conferences/wcm-2005.html.
More immediately, the deadline is approaching next week for a $200 "early bird" discount off the regular registration price. Those who register after Feb. 1 will pay the full $1,175 price, unless they're planning to bring some friends. Group registrations of three people will receive a 10% discount. Group registrations of five people receive a 20% discount.
Discount conference rates also are available in advance for hotel rooms occupied between Feb. 27 and March 4, 2005, for a conference scheduled to take place on March 2 and 3 (with an evening reception on March 1). Registrants who need overnight accommodations are strongly urged to make their hotel reservations as soon as possible with the Hyatt at Fisherman�s Wharf, the conference venue, via the following link: fishermanswharf.hyatt.com/groupbooking/alga. Reservations are subject to availability and will be secured on a first-come, first-served basis.
The conference agenda also is now available on the Web page: www.warrantyconference.com/previous-conferences/wcm-2005.html. As several readers have noted, the agenda is quite full. Hopefully, readers also will agree that it contains a balanced mix of warranty vendors, manufacturers, and consultants, not to mention representatives from both the product warranty and extended warranty sides of the industry.