March 11, 2010

Design for Warranty:

Products can be designed so that not only can they be fixed faster, but also so they can be fixed by customers themselves. Given that labor is the major component of warranty claims, product designs that plan for customer self-repairs can cut costs.

Can customers do their own warranty work? And if so, will they resent you for making them do it? Or will they feel like superheroes and tell everyone what a fine company you have?

At the Warranty Chain Management Conference last week in Los Angeles, a panel discussion entitled "Design for Warranty and Customer Self-Repair" suggested that shifting some of the labor to the end user can not only reduce costs, but also can raise customer satisfaction levels.

Joe Barkai, Manufacturing Insights

Joe Barkai, the practice director for IDC Manufacturing Insights' Product Life-Cycle Strategies research service, led off the discussion with a brief overview of the concepts.

He began by listing three more or less interchangeable terms: end-user self-repair, design for self-repair, and design for service. "One is the activity while the other is the design for the activity," he said of the first two. And then design for service is a term that outlines how companies can make their products easier to repair, whether it's end users or professional technicians making the repairs.

Design Hierarchy

"There is a kind of hierarchy," he said. "And I wanted to suggest that design for self-repair is really part of design for warranty cost reduction, which in itself is part of a broader discipline, design for service."

Figure 1
Design for X Hierarchy

Figure 1

Source: Manufacturing Insights

And that, in turn, is just one part of a suite of "Design for X" or "DFX" guidelines, which Barkai said are a way of resolving conflicts between competing interests in the design process. For instance, he said, design decisions frequently pit cost against quality, or quality against time to market, and DFX seeks to strike the right balance between the two competing drivers.

Also known as "Design for Excellence," the guidelines come from a book of the same name (ISBN 0070071381) authored by James G. Bralla and published in 1995 by McGraw-Hill.

According to the book's description, it is a guide that helps mechanical and electrical engineers design and manufacture quality products using design for excellence. Readers learn how to apply the same knowledge-based techniques that improve manufacturability to optimize a product's quality and reliability, safety, serviceability, user friendliness, environmental friendliness, and short time-to-market design.

Reducing Warranty Cost

But we're getting a little off-topic. It was a warranty conference, and the panel wanted to talk about how product designs could be improved so they were easier and less costly to fix. Most times, when the topic of warranty cost reduction comes up, it's about the automation of the workflow to reduce inefficiency. Once that's been done, it becomes a discussion of how text and data analytics can help a company spot defects earlier, or reduce waste and fraud sooner.

Those topics were very thoroughly discussed at WCM 2010. But the Barkai panel presented yet another way companies can reduce warranty cost. Products can be built so that they're easier to open. Parts can be designed so they're easier to remove and replace. And systems can be produced so they're easier to monitor, configure, or diagnose.

Ultimately, the goal is to reduce warranty cost by reducing the severity of each warranty event. While early warning systems attack the frequency of product failures, design for warranty and specifically design for customer self-repair attack the cost of product failures.

"There is an opportunity to increase margins by reducing warranty costs," Barkai told the audience. He compared warranty cost as a percent of product sales to net profit margins as a percent of revenue, suggesting that in some instances profit margins are shrinking even as warranty costs remain about the same. For example, Caterpillar, Whirlpool, Hewlett-Packard and Dell, he explained, are spending 2% to 4% of product revenue on warranty, while profit margins hover around 5% to 10%.

The net effect, Barkai said, is that companies continue to look for additional ways to reduce warranty cost. One way he predicts they'll do this is by finding ways to help customers to fix their own products, and thereby reducing the need for warranty labor payments.

Reducing Warranty Labor Costs

Across all industries, almost two-thirds of warranty costs are labor-related, Barkai suggested, while only a third is for parts, and a very small share of perhaps 4% or 5% is for administrative overhead. So if all labor costs could be eliminated by shifting that task to the customer -- a lofty but unlikely goal -- then warranty expenses could be reduced by as much as two-thirds.

The objective is to encourage self-repair, but not to require it. The purpose is to reduce the cost of labor, by turning the customer into their own service technician. The plan is to redesign the product so that even a beginner can follow simple instructions and fix the unit. And that can increase uptime by shortening the time out of service, which in turn makes for happier customers. "Self-repair may be an opportunity to differentiate our products," Barkai suggested.

Marc McKenzie

Marc McKenzie, managing partner at InnovationBlue LLC and a recently retired warranty professional from HP, said he sees customer self-repair as not only a cost-reduction strategy but also increasingly as a customer requirement. "Is it something the customer wants?" he asked. "What will make the customer happy?"

Years ago, for instance, a typical desktop PC's side panels were held in place by multiple screws, and something as simple as a disk drive replacement took a bit of skill. Nowadays, the side panels snap on and off, and the disk drives are mounted on brackets that allow easy replacement. So now it's quite possible to ship a replacement drive to a consumer and talk them through the swap over the phone.

In other words, the product can be redesigned to allow those with less skill to fix them. And that in turn allows some desktop repairs to eliminate labor costs completely, by deputizing the amateur, non-professional end user to replace the professional technician.

Dangers of Self-Repair

In other industries, it's not so simple. Tube televisions, for instance, are loaded with high voltage components that amateurs should never try to tinker with. But some of the newer projection TVs rely on bulbs that are both easy to replace and highly likely to need replacing.

Joseph Sannella, general manager for product lifecycle planning and operations at TTE Corp. (formerly Thomson) said that easy bulb replacements weren't always the case, however. He said he promoted customer self-replacements within his company as a way to save money, but that entailed the up-front cost of redesigning the unit to make it easier for customers to replace the bulb themselves.

Sannella reckons that Thomson, and now TTE, can save $150 per incident by not having to "roll a truck" to replace a bulb. Meanwhile, the customers are happier than if they had to wait for the truck, because as soon as the bulb is delivered, they can fix it themselves. And instead of waiting for a stranger to help them, they feel good about doing it themselves.

On flat screens, he said, there's not much a customer can self-repair, but he still asked engineers to design access doors on the back of the units to speed access. He also asked designers to include a USB port on every unit, in case that becomes an opportunity for customers to update their own firmware or perform their own diagnostics. In other words, the designs were heading in the direction of customer self-repair even before the customers headed in that direction.

Customers Demanding Self-Repair

Chad Semler, the national warranty manager at truck cab manufacturer Autocar LLC, asked the panelists if customer self-repair would ever become a requirement. He said that in his business, the reduction of downtime is already so critical a concern that customers are absolutely demanding the right to self-repair their trucks. Then again, his typical customers are fleet operators that are as well-qualified to repair their vehicles as some of the dealers. So it's not quite the same as expecting a consumer to fix their own TV or desktop computer.

In the airline industry, it's not unusual for the ground crew to replace a module and get a plane back into the air before they're even certain that the module actually needed a repair. And then, if it does prove to need a repair, they figure out if it's in or out of warranty. And once they're finished performing this advanced form of customer self-repair, they might even bill the manufacturer for some of their own labor. There's nothing worse than an aircraft on the ground, not earning revenue. In fact, Boeing estimates that a one-to-two-hour AOG delay can cost an airline $10,000 in downtime.

There's also an obvious emotional side to the practice of self-repair. Fleet operators may think nothing of it, but some consumers are completely thrilled to be able to perform their own hardware repairs. While some customers doubt their own skills when it comes time to repair an appliance or a home computer, others feel like superheroes when they complete the task successfully. The panel recognized this emotional boost, suggesting that besides reducing costs and increasing uptime, self-repairs can also boost customer satisfaction.

Beginner's Mistakes

One problem Barkai mentioned and others on the panel seconded is the relative lack of repair documentation aimed at the do-it-yourself consumer. Everything that's written is seemingly aimed at the expert repair technician working for a service center. If these advanced manuals are given to a novice, it can lead to mistakes or misunderstandings that increase frustration, lengthen repair time, raise warranty costs, and reduce customer satisfaction. In response, panelists said, companies need to develop simpler diagrams and how-to manuals aimed at customers with entry level repair skills, rather than following the one-size-fits-all approach.

John Shane, a project manager at Whirlpool, said that as far back as 1980, the appliance company opened a call center and launched a Do It Yourself assistance service specifically for consumers.

Shane acknowledged that this competed somewhat with Whirlpool's own service business, but it was what customers wanted. Now, thirty years later, they want more DIY options. "It's definitely a DIY nation," he said. The difference is that now that DIY knowledge base can be made available on the web, so even the publishing costs have been reduced.

Shane added that Whirlpool is now designing appliances aimed at a future "smart grid," where an intelligent monitoring system can keep track of all electricity flowing in the system, making adjustments and possibly even commanding certain machines to shut down at peak hours. For instance, on a very hot day as electrical usage soars, the "smart grid" might command the washer and dryer to wait until nightfall to do their work. In return for agreeing to postpone non-critical usage to non-peak hours, a consumer might qualify for lower electrical rates.

Remote Monitoring vs. Privacy

This, of course, would require a much higher degree of remote monitoring, and that could also involve some loss of privacy. Daryl Kreskowiak, a warranty professional with extensive expertise in the automotive industry, suggested to the panel that remote monitoring systems such as OnStar can be used not only in breakdowns and emergencies, but also after accidents if there are doubts that one of the drivers was obeying the speed limit.

Barkai and Sannella suggested that drivers should first be asked to opt in to such a system, and second should be offered some sort of compensation for giving up their privacy. For instance, if they might be penalized for speeding, they should also be offered reduced insurance premiums for not speeding. If the OnStar diagnostic system is going to help dealers increase their sales of scheduled maintenance services, they should also offer discounts.

Larry Maye

Larry Maye, chief operating officer at Precision Camera and Video Repair, recounted how one customer seeking a warranty repair insisted their camcorder was never exposed to water. It just stopped working, they said. But Precision Camera's repair technicians were able to get it working again, and they discovered that the last image it recorded was of somebody water-skiing, followed by the lens hitting the water. The warranty claim was denied.

Maye, whose company operates one of the largest camera repair facilities in the world, is not a big fan of customer self-repair. "I don't like it," he told the audience. In the digital camera business, while he admitted that some cosmetic repairs might be better done by the consumer, he said they should never be asked to open the unit and replace the small parts themselves. Besides, with certain units there may be a need for calibration or alignment that goes way beyond the typical customer's skill set.

Encouraging Repairs?

However, Maye also noted that the question for many consumers isn't simply self-repair vs. professional repair. For them, the more fundamental question is whether to seek a repair at all, as opposed to simply discarding the broken unit and buying the latest, greatest unit as a replacement. And that, he said, is bad for the environment.

"There is a monetary value to protecting our environment," Maye said. "There is a monetary value to reuse." So, in that respect, if encouraging self-repair is a way to encourage repairs and discourage throwaways, it has a "green value," he said. And if the unit can't be repaired economically, it still may yield some spare parts that can be recycled.

Another problem is that there just doesn't seem to be a groundswell of interest in the topic among consumers. Maye said he personally doesn't get any satisfaction out of self-repairs. He said he'd rather buy a refurbished unit that's already been professionally repaired. But that's just a personal choice, he said. Others might enjoy fixing their own products.

Barkai confirmed this feeling -- that self-repair isn't for everyone -- by showing how his Google searches for terms such as "design for service" or "self-repair" resulted in only a few thousand matches, while searches on terms such as "camera repair" or "printer service" resulted in hundreds of thousands of matches. In contrast, even a somewhat esoteric engineering-related search term such as FMEA (short for failure modes and effects analysis) turned up 246,000 matches, he said.

Barkai's conclusion is that design for self-repair has yet to gain much traction in the marketplace. "It's not a well-searched discipline," he said, "so I might infer from that that there's not such great interest in the topic."

Maturity Model

Barkai said that as a result, most companies aren't yet supporting customer self-repair. In fact, some will void the warranties of those who try to repair their own products. For instance, on both the Apple iPod and the Microsoft Xbox 360, if the seal is broken on the back panel, the warranty is void. In other words, warranty and self-repair can be sworn enemies.

Those companies that are designing their products for self-service, he added, are doing it on a product by product basis, without any company-wide strategy yet evident. Some companies such as Whirlpool will send parts to customers who request them, especially if they seem knowledgeable and their request is specific.

Barkai displayed a maturity model in which companies begin to support customer self-repair at a basic level, perhaps by shipping them select parts, mostly as a goodwill gesture. Then they begin to support customer self-diagnostics, as well as select self-repairs.

Shane said this practice has helped Whirlpool to reduce the frequency of what he said were referred to internally as "yep calls." For instance, a customer calls in, and reports that they need a new handle on their washer. A truck rolls, and the technician verifies that yep, the customer needs a new handle. So they come back a second time with a new handle. That's a "yep call." And it used to be a major waste of labor.

Customer Self-Diagnosis

Then again, even if self-repair is out of the question for certain manufacturers, customer self-diagnosis can still save time, reduce cost, and raise customer satisfaction levels. Frank Priscaro, the vice president of marketing at Vextec Corp., recounted to the panel how his Apple Macintosh battery was unable to hold a charge as he was getting ready to leave for the conference. So he stopped by an Apple store on his way to the airport, and told a technician that his Mac needed a new battery. But if it was going to take a while to replace, he said he would have to take the unit with him to LA and use the power cord, because his flight was leaving in less than an hour.

The Apple technician listened to his self-diagnosis, and was then able to swap out the battery in nearly no time, and did so for no charge, Priscaro said. Already an Apple loyalist, Priscaro said he was even happier to have assisted with the repair in this small way. And yes, he made his flight and had his Mac running on battery power at the conference.

Barkai said the next step up the ladder is to a stage where the help desk is trained to support both self-diagnostics and self-repairs. There also might be situations where the user's product configuration has been saved online, and can be restored remotely with the customer's permission. For instance, the Apple iPhone, while not allowing for any customer self-repairs, still has a built-in restore function. Even if the unit becomes inoperative, all that personal data can be quickly pumped into a replacement unit.

Being Good Listeners

Sannella said TTE is training its call center agents to be better listeners when it comes to customers' explanations of what they think is wrong with their units. The goal is to avoid rolling a truck, perhaps by asking the customer to do something as simple as unplugging the unit and the cable box, and waiting a few minutes to plug them back in.

Ultimately, he said he can see a day where the customer unleashes more advanced diagnostics that are built into the unit. The customer might not understand all the tests they're running, but they can surely tell the customer service rep on the phone what codes the unit displays after each test. Or possibly the unit might be connected to the Internet in such a way that the call center rep can do the tests by remote control, while the customer is on the phone.

At the very least, that might reduce the number of "yep calls." Or it might allow for more planning, so as to increase the number of times the repair technician has precisely the right part on the truck, allowing the unit to be fixed quickly on the first visit.

The ultimate stage in Barkai's maturity model is one where user repairability has been designed into the unit, along with all sorts of remote monitoring and proactive diagnostic tools. That stage also will require a more extensive use of analytics --essentially predicting failures before they occur -- and in some cases, replacing modules before they fail.

Big Brother Is Watching?

Shane said Whirlpool is already looking for ways to allow the customer to remotely monitor their own appliances. For instance, a washer or a dryer could send out a signal to the user over the Internet when their load is done. But that, he noted, is an expected event. People will pay for that kind of feature. But Whirlpool isn't sure if customers would be willing to pay for remote monitoring systems that look for unexpected events, such as a refrigerator that's not keeping food cold enough. They'd rather buy a refrigerator that worked, and therefore didn't need such an alert system.

McKenzie said that when he was with HP, there were discussions about how remote monitoring could be perceived negatively if the company was detecting problems before the customer. For instance, HP could theoretically send out a replacement hard drive before the customer knew the original was about to fail. That could be perceived quite positively. But what if they forgot to call the customer first? That could be perceived quite negatively, especially if the customer was already worried about their security and privacy.

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