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Winning With Service

March 10, 2006
Service is becoming "super service" as machine tool builders and other production equipment vendors innovate a new competitive model. No longer a tired after-sales routine, service is now the strategy that builds and establishes reputations, sells the pro

If machine-tool builders would teach their role model service strategies to the auto industry, maybe...

  • Carmakers would emphasize innovative service strategies to compete and grow sales potential.
  • Auto showrooms would be reassigned to focus on delivering on-going educational value to the existing customer base.
  • Cars would always be plugged in at night -- to connect to the manufacturer's on-line diagnostic and maintenance system.
  • And that on-line connection could resolve most mechanical/electrical optimization.

Those quips are extrapolations (slightly exaggerated) of how various providers have innovated service strategies to deliver new customer value in industrial equipment. The motivating factors go beyond accommodating both the growing technological complexities of machine tools and the traditional cyclical nature of the industry, says Mario Winterstein, business development director, the Association for Manufacturing Technology, McLean, Va. He sees a third major motivator -- competitive differentiation -- "especially in certain basic machine categories where the look and feel of the equipment is very similar. In those instances service has become the means to get closer to customers."

Winterstein doesn't exclude technological complexity as a growing influence, however. "In its simplest form, that service opportunity becomes one of optimizing systems -- toward preventive rather than corrective maintenance." Winterstein cites the builders' growing use of techniques such as remote access for on-line monitoring and calibration of customer's equipment.

Lean thinking is another factor. "Companies evolving into lean thinking tend to lose their internal capability of servicing and maintaining their machines," Winterstein says. "It is increasingly evident that more equipment suppliers are becoming responsible for the service and maintenance."

Regardless of what motivates the new super status of service, the result can be revenue growth for builders in both up and down cycles. And when an up cycle inspires new equipment investments, the customer already will be aware how valuable the service was during economic hard times.

Growing During Down Times

"From our viewpoint, machines are increasingly more difficult to differentiate for most applications," admits Harry C. Moser, president, Agie Charmilles Corp., Lincolnshire, Ill. "There are many good competitors, and while we think our products are the best, for a lot of applications it is getting increasingly hard to prove, and therefore we have chosen to [also] differentiate via service." (Charmilles, a Swiss firm, is a leading North American supplier of wire EDM, CNC die sinking and manual EDM systems. Its sister company, Mikron, is a supplier of high speed and 5 axis CNC milling machines.)

Does the strategy work? "To corroborate that we've done user surveys -- not just our customers but the whole universe of users -- and we are happy to discover that we are rated as having the best service amongst all of our competitors."

The volatility of machine tool sales is another reason for emphasizing service, adds Moser. "From the late '90s to 2003, total sales for us -- and the whole machine tool industry -- were down by 50%. But in the aftermarket our service operations not only grew but also increased in profitability. That enabled us to keep valuable technical sales people by shifting them to enhance service support of the existing installed base."

The result: ". . . delighted customers that are primed by our service performance. That makes it easier to sell the next machine."

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Creating Competitive AdvantageFrom the late 1990s to 2003 -- from the peak to the valley -- Charmilles hired 20 additional service engineers at a cost of about $1 million annually, Moser says. "But by having them we were able to cut our travel expenses by $500,000. Instead of having people flying [to see customers], we expanded field operations to 31 locations and made it easy to make business calls by car. In addition, local service reduces the need for engineers to incur hotel costs."

Localized service also reduced turnover since service engineers were not continually away from home, Moser adds. "That cut attrition costs by approximately $500,000. Those two cost savings wiped out the cost of hiring for the service expansion," he says. "And because those people increased our capacity, we increased our sales of service and preventive maintenance to our existing customer base by $2 million annually.

"That validated our decision to hire 50% more service engineers -- even though equipment sales fell by half. Fortunately, corporate permitted us to do that."

Moser's customers report substantial performance gains from the company's preventive maintenance programs. Moser says it is not unusual for customers to experience machine speed increases of 15% and machine accuracy gains of 40% or more. The result: The customer gets a more accurate, more productive machine. Depending on how machines are used -- for more work because of that additional speed -- customers can experience paybacks of 200% to 4,000% ROI on the preventive maintenance cost, Moser says.

The support function is becoming responsible for a bigger part of performance.Additionally the increasing emphasis on lean and just-in-time operation provide further [service] justification, Moser adds. "Machine availability becomes more strategically important in the absence of big inventories. Machine downtime has become a catastrophic event."

Charmilles' PM programs are supported by 99% spare parts availability for same-day shipment. "For the 1% that we don't have on the shelf, we get them in four days from the parent company in Geneva, Switzerland." (Of the company's installed base -- 11,000 machines -- an average of less than one machine is affected by that 1% at any one time.)

Moser says the overall impact of Charmilles' service strategy is to make customers more competitive and more responsive to their customer's needs. "The customer gets some relief from the competitive squeeze from Asian competition."

Workforce Benefits

Moser says that Agie Charmilles also offers operator training to help customers accommodate the chronic -- and growing -- skill shortage. Moser estimates a 20% productivity advantage to be the benefit of Agie Charmilles training over the hand-me-down training typically available at a plant.

Training is even offered on machines no longer in production. He says that while today's new machines are more complex, they are easier to operate. "When you think of what the operator had to do 20 years ago, consider that 70% of those actions are now performed by the equipment itself on current models. As a result, an operator can run three to four of the new machines compared to only one or two of older models." On the new machines training CDs are available for running on the machine control or on a PC. Moser says the reduced operator requirements help give domestic manufacturing an edge.

Moser says off-shore labor costs are not the only challenge that the productivity of new machine tools can help resolve. The other issue is the growing unfilled skilled manufacturing job openings revealed by a study done in cooperation with the National Tooling and Machining Association (NTMA). The findings reveal that domestic manufacturers are confronted with job openings equal to 4.7% of total shop employment -- roughly 35,000 skilled positions.

The NTMA estimates that an individual industry employee generates an average of $120,000 in sales annually. Eliminating the 4.7% job vacancy rate would cause a $4.2 billion decrease in the trade deficit and a corresponding increase in the U.S. GDP. With manufacturing's approximate 2.4x-multiplier effect, the GDP has the potential to be $10.1 billion higher per year, says the NTMA.

Moser also is active in NIMS, the National Institute for Metalworking Skills. (He serves on the board of the Washington, D.C.-based organization.) Participating students can get credentials in things such as EDM, milling, turning and mold-making.

Keeping The Customer Connected, Interested

To help customers calling in with service problems, the company has created a database of 20,000 electronic service reports. When a customer calls with a service problem, a computerized search can quickly provide details on typical causes and how repairs and adjustments were made under similar circumstances.

"The strategy behind our service operations is to eliminate anything that would motivate the customer to go out and test drive the competition. We try to encourage machine users to augment their vendor analysis process with customer support data -- such things as parts availability, phone service response and available training. That helps counter the tendency of customers to look only at the machine and price when considering new equipment. We are intentionally deepening our relationship with the customer." (To monitor customer expectations on service, Moser annually visits 50-100 customers.)

Annual surveys help Charmilles optimize the customer connection. Moser says 96% typically respond that they would consider buying Charmilles equipment again. (He says he would like to query Mercedes and BMW to see what their customers tell them.)

Charmilles also reaches out to new prospects with its service message. For example, sales brochures comprehensively detail both machines and service, says Moser.

Teacher, Solution Provider

Last Nov. 8 another facet of the super service concept convened at Mazak Corp.'s National Technology Center in Florence, Ky. More than 2,400 customers gathered for a three-day "Touch the Future" conference on technologies emerging in manufacturing. (The company produces machines and systems for the precision machining of metal parts, including CNC turning centers, horizontal and vertical machining centers, multitasking machining centers, turnkey cells and software solutions.)

Brian Papke, president, Mazak Corp., says to look beyond machine price and consider technology and global support when buying.Brian Papke, president, says Mazak's Florence, Ky., National Technology Center signaled the beginning of a broader service role for the company -- as both an educator and solution provider. He says that first center, which opened in 1996, has already proved its worth as a collaborative customer service facility. The intent is to help customers understand, adopt and optimize implementations of the latest machine tool technology. Since 1996, 26 Technology Centers have spread through Mazak's global operations including one at the company's Yamazaki Mazak headquarters at Ogouchi, Japan. Currently under construction in Nagoya, Japan, is a Global Technology Center adjoining the parent company's Minakamo plant.

Mazak's Technology Centers don't co-exist with traditional machine tool show rooms -- Technology Centers are customer service replacements, says Papke. "Technology displayed for customers in a static showroom tends to be more frightening than helpful," asserts Papke. Mazak's solution is to demonstrate engineering developments in the more useful environment of a Technology Center. At the Florence center, process application engineers are teamed with more than 30 machines from Mazak's current lineup. Recently that facility was expanded from 33,000 square feet to 69,000 square feet, a $4 million investment, adds Papke.

In North America Mazak has six centers collaborating and interacting with customers with two more scheduled to open later this year. One is a $3.5 million facility near Toronto, Canada. The other, a $5 million center, is being built at Hartford, Conn. Papke says $240 million represents customer service connected investments since April of 2005. Allocations cover such things as the new technology centers, increases in plant capacity, spare parts for the North American market, ($46 million) and an automatic storage and retrieval system ($2 million).

Papke says customers confront a new challenge in a service-oriented market. "Ideally, he adds, the new competitive environment should inspire new buying practices." His advice: "Look beyond machine price to consider the technology and the total global support."

Grading On Customer Service

Bob Skodzinsky posits that one service call should be enough to fix a problem. Once an executive at the former Warner & Swasey Co., he remembers when a service call was just the beginning of a two-, maybe even three-visit sequence from a repair technician. "Those were the days when machine tool sales organizations focused only on sales," says Skodzinsky, now president of Flat Rock, Mich.-based Haas Factory Outlet, a division of Gerotech Inc.

Today Skodzinsky is graded on the ability of his service technicians to meet the one-stop repair standard of Haas Automation Inc., Oxnard, Calif. He says the factory sets a 90% compliance goal that is monitored by customer surveys. The verification process focuses on customer satisfaction including response time, conformance to schedule and first-call completion, says Haas Automation's John Roth, director of customer service. (The product line, all American made, includes CNC vertical and horizontal machining centers, turning centers and rotary tables.)

Skodzinsky says the organization of the Haas Factory Outlets reflects the machine tool maker's determination to combine a high service level with a franchise-like branding of standard presale and postsale activities. He says distributor service technicians are required to maintain factory certification and use Haas labeled service vans stocked with factory maintained spare parts. Haas Automation maintains repair parts valued at $50 million at the more than 100 global Factory Outlets, says Skodzinsky. He maintains 12 service vans in Michigan.

The IT Connection

Service is becoming more than physically responding to a machine tool site. Increasingly the issue is optimization, not repair, and that's where information technology is delivering a communication solution, says Marlow Knabach, vice president marketing, Mori Seiki USA Inc., Chicago.

His reference is to a communication platform called CAPS-NET that connects to computer numerical controls (CNCs). It can download documents, setups, maintenance and also report back such things as production rates and Pareto analysis charts.

"The next step is to enable machine operators with cell phones to access customer service to have technicians take over control and analyze the diagnostic functions internally," says Thomas R. Dillon, president. "Our Japanese customers already have that capability, and we are planning a U.S. introduction." Dillon sees more than a robust, real-time customer service advantage. He says such service enhancements top the list of inducements that lead customers to future machine tool buying decisions.

The company's call center already resolves 79% of customer service requests without a service visit. "With the upcoming CAPS-NET introduction, we think that could be ramped up to 90% to 95%," adds Dillon. He describes "phenomenal results" from tests in the North American market.

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