June 18, 2009

NEW's Smart Procurement:

By taking advantage of ServiceBench's connectivity with servicers and parts distributors, NEW is hoping to speed up repairs by helping servicers to find and order parts. The resulting reduction in turnaround time should make NEW's retail clients happier and its service contract customers less unhappy.

Robert Metcalfe, inventor of the Ethernet and founder of 3Com Corp., once said that the value of a network equals the square of the number of users it connects. With NEW's ServiceBench network, we're starting to see that value prove itself, as the network adds more users in more industries and gives those users more reasons to connect.

First, we must note that NEW Customer Service Companies Inc. has been a sponsor of this newsletter for nearly five years. Second, we should also note that back in early 2008 when NEW acquired ServiceBench, we published a newsletter that said "we think this is a very big deal for the warranty industry." That's because we could see how important network connectivity would become to warranty professionals as they automate more and more of their workloads.

In the realm of warranty work, at least within the brown and white goods industries, everyone who was anyone was connected to ServiceBench. The network reached not only the manufacturers and retailers, but also the administrators and the repair service providers.

ServiceBench began as a network hub for warranty professionals in the major appliance industry, and then grew into the consumer electronics and home computer industries, where NEW Customer Service Companies became one of its clients four years before the acquisition. NEW began using ServiceBench for the simple reason that it was very well-connected.

In the appliance industry, ServiceBench had already connected to manufacturers such as Electrolux and Whirlpool, and to retailers such as Sears. So after it was connected to NEW -- the administrator for top consumer electronics retailers such as Wal-Mart Stores and Best Buy Inc. -- it achieved what the networking business calls "critical mass."

Find Parts Faster

NEW is now deepening the suite of services available to those servicers through the addition of a parts ordering module called Smart Procurement. In a nutshell, the new module helps NEW's servicers find parts faster and make repairs sooner, with less effort and less paperwork. That in turn makes customers less unhappy that their gear needed repairs, which hopefully also makes them more likely to return to the same retailer to buy more gear and more service contracts.

Bill Maddox, NEW's senior director of service management, said the company spent more than a year interviewing servicers nationwide, riding along with some on their dispatches, and taking some aside for roundtable discussions during industry conferences. The goal was to figure out what the network could do to speed up repairs.

One thing NEW found was that most servicers will check with perhaps two or three distributors for a given part, and if it's not readily available, the repair is delayed until one of those distributors can get it in stock. And if the part can't be found at all, the administrator may need to turn the repair into a replacement, driving up costs even further.

"The Smart Procurement system is designed to reach out to multiple parts distributors, manufacturers, and other parts sources, so that the chance of us finding that part are much better, therefore improving the turn time and helping that customer experience," Maddox said. The more places it looks, the more parts it finds. Maddox said the system also looks for close substitute parts, which improves the success rate even more.

Kevin Mountain, the parts manager at Precision Television in Concord, California, said the Smart Procurement system gets him better results with less effort. "So far, I've seen nothing but good stuff come out of this," he said. "I really like the idea of them going to different vendors to find parts for me. It's a lot less of a burden on us."

"We don't have to research any of the parts," Mountain added. "We don't need the pre-authorizations. We just order the part. It's kind of one-stop shopping. It's all right there."

Less Time On Hold

In the past, NEW's servicers would go onto the ServiceBench network to get a pre-authorization amount, and then they'd begin to make their repairs. If, during the course of that repair, it became apparent that they'd need more time or more parts to complete the job, they had to call in to an (800) number, and frequently they had to wait on hold. If this happened during a housecall, it made the whole process look inefficient and antiquated -- right in front of the customer.

Maddox said the goal of Smart Procurement is to do more of the searching for the servicers, and to do more of the paperwork associated with their jobs, so the servicers can spend more time on the actual repairs. "It's designed to be a one-stop shop, if you will, for servicers to receive their dispatches, to receive their authorizations on the service events, to order their parts, and to file their claims, all in one location," he said.

"Servicers keep telling us their administrative burden -- their back office process -- is a big point in their profitability for them as a servicer," Maddox added. "So we realized that if we had a platform where they could go to one place to perform all of their interactions with NEW, that it would help reduce that administrative burden."

That makes the servicers happier to work with NEW. But that's not all, as they say on late-night television commercials. Now NEW knows what parts have been ordered and when they'll arrive, so it can update the customer with a status report, making them less unhappy.

If there's going to be a delay, the customer will be told about it faster, which will also make them less unhappy. If the repair is a housecall -- for an appliance or perhaps a big screen TV -- NEW can arrange to have the parts shipped directly to the customer, and then call them to schedule a second visit on the same day as the parts will arrive.

Rather than looking inept in front of the customer -- having no clue if parts are available or when they'll arrive -- now the servicer looks good, thanks to a smart network with all the right connections built in. And after it's all over, and the customer's unit has been fixed, perhaps at some future barbecue or cocktail party they'll say to the neighbors, "boy, I'm glad I bought that service contract from [insert name of retailer here]!"

Happy Endings

Luke Kathol, NEW's vice president of quality and service management, said the goal is to turn a break/fix episode that almost always starts out with an unhappy customer on the phone into an event that has a happy ending. "Our job is to take that dissatisfied customer, and through our customer service, to have them go away saying 'sure, the product broke, but I'm happier with Best Buy/Wal-Mart/whoever than I ever was,'" he said.

NEW and its ServiceBench network help the servicer work faster, and that makes the retailer that sold the product look better. That drives customer loyalty upwards, increases repeat purchases, and hopefully, boosts the reputation of service contracts in general.

"In this industry," Maddox said, "one of the main reasons for a dissatisfied customer is when a repair takes too long to complete. Often, that is caused by the inability of the service provider to locate parts for the repair. So we realized that in order to improve that parts availability issue, and to improve customer service as a whole, we need to be a pro-active partner in that parts procurement process."

Maddox said that NEW is focused on helping its retail partners to maintain and grow their customer brand loyalty, especially during this economic downturn. But ironically, Smart Procurement isn't something these retail partners will be telling their customers about. In fact, the customer may not know anything at all about the network that delivered the services which ultimately accelerated their repair event.

"The customer really doesn't know NEW," Maddox said. "They know the retailer. So we need to make sure that we help the retailer with their brand loyalty. And we can do that by making sure that we provide exceptional customer service during the repair of the customer's product."

Kathol made the same point. "We deliver on the brand of our client," he said. "We don't want people to know NEW. But obviously, our service network knows NEW. Their relationship is with NEW. And that's why we're investing in the systems, processes, and the technology to help them thrive in these tough times."

Designed By Servicers, For Servicers?

Serg Pogosyan, the owner of SoCal Tech Inc. in North Hollywood, California, said he suspects servicers played a big role in the design of the Smart Procurement system, based on the way it cuts through the red tape surrounding entitlements and authorizations. Before, he said, something as simple as replacing a lamp in a projection TV couldn't be done over the weekend, because his guys couldn't get an authorization over the phone from NEW until Monday morning. First, NEW would have to check if the customer is entitled to a new lamp, then SoCal Tech would have to order the part from a warehouse.

Now, it's all done automatically. "Once you submit, it tells you if the part is in stock," Pogosyan said, "and it tells you if the customer is authorized to have it replaced. If all those things fall into place, they ship the part to you within two days. I think that's one of the best things they could have done."

Pogosyan said it's much more than just an online parts catalog. "It's like a one-stop shop for all the electronics that we need. One of the good things about it is it cuts down on the administration. We don't need to have two people working on one work order -- one getting the authorization and the other trying to get a part," he said. And that, in turn, makes working with NEW more profitable.

Pogosyan said the thing he likes the most is how the Smart Procurement system goes into multiple databases to look for a given part. Previously, his guys were going into each warehouse's database, one at a time, to see if a given part was in stock. If not, they would have to return to one of them and back-order the part. The new system, he hopes, will both reduce the effort and speed up the repair.

He said he also likes the way the system works in the other direction. NEW no longer has to call him for a status update. It's built into the network. So if the customer calls NEW, the administrator can tell them exactly where things stand with the repair -- when the parts will arrive and when the repair will be completed.

Maddox said this makes NEW look like it's on top of things. "Customers are OK with the fact that something needs a repair," he said. "They just want to make sure that somebody is looking after it."

Kathol said Smart Procurement will also cut down on the number of instances where a repair is delayed so severely that the administrator has to buy the customer a replacement unit. "At the end of the day, a customer wants a truck to show up, fix their products, and be done," he said. "They really don't want to go through a buyout process. No one does. So we're using our connectivity in the distributor world and our ability to look at failure data to forecast what parts are really needed out there. We're trying to do some of the heavy lifting, and take some of the burden off the servicers, to get them focused on repairing products. Let us focus on making sure we have the parts in the system to get the job done."

Better Forecasting

As an administrator of literally millions of service contracts, NEW is already in possession of deep and detailed records about failure rates and the average cost of repairs. Now, thanks to Smart Procurement, the company also is going to get much more detailed data about what parts are needed for a given unit, to the point where Kathol said he expects it to help NEW with parts forecasting.

In other words, if NEW knows how many units were sold in a given city and how many have service contracts, it can make some very educated guesses about where and when the spare parts will need to be in the future. And then when a customer calls in and describes a problem over the phone, NEW can make some very educated guesses about what parts are needed. If it's a housecall, NEW can make sure the most-likely-to-be-needed parts are on the truck before it rolls. And so on.

Maddox said the Smart Procurement system is designed to be able to connect with any type of parts distributor or manufacturer, to search their databases for parts, and then to interface with any service provider that is on the ServiceBench network. He said this will be the case for all industries served by NEW and ServiceBench: consumer electronics, computers, appliances, HVAC, exercise equipment, outdoor power equipment, and others.

"We'll be starting off primarily with consumer electronics and appliances, but we'll branch out as we roll this out over the next six to twelve months," he said. "We're currently out there training all of the service providers that are in our network. On ServiceBench today, they can sign up for training classes on how to access the Smart Procurement portal, and be able to order their parts. The training takes somewhere between 20 and 30 minutes. We started training last Monday. And we've already had hundreds of servicers go through the training."

Biggest Problems First

Kathol said that during this pilot phase, Smart Procurement will be aimed first at searches for hard-to-find parts, where delays, escalations and buyouts have been frequent. "We're rolling slow with those calls that require exceptional parts," he said. "Allowing us to find those helps us to improve satisfaction, get a faster turn time, reduce those escalations for the retailer, and improve their brand loyalty."

By the end of June, Kathol said NEW will have rolled out Smart Procurement to a few more servicers. And then in early July, he said he's looking for a full roll-out schedule of Phase One, and then more features and functionality added in the following two to three months.

Maddox said if all goes well, within a few months NEW's customers may notice faster repairs and better communications about the repairs. But they won't know why. And that's just fine with him. "In these economic times, we know that we need to improve the service offering," he said. "We need to improve the customer experience. We need to help our clients maintain their brand loyalty. We need to do those things. And this is the way we felt we needed to go."

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