The above mix has given me the possibility to compare and pick the best from each company and see primarily after sales as a business rather than nuts and bolts. In addition to that I let the numbers and KPIs speak and activate actions based on that. (One of my previous managers said that decisions are something you have to take if you haven’t done your homework. This statement forms part of the basis of how I work).
I’ve been in the Middle East/North Africa since 1997 and seen the good times and the bad, and learned from both. The topic of this blog is Internet of Things (IoT) in our business and how I think it should be used and why.
After the crisis in September 2008, many of the customers in the UAE were suffering. Number of projects were down, fuel prices went up, prices for transported ton of material dropped like a stone. In other words, they had severe issues making ends meet. As an after sales manager for one of the heavy equipment dealers in Dubai, this meant that our customers would not have enough money to service and repair their machines and we’d lose revenue.
In this environment I started to look at what we could do to help. I found a few things quite quickly:
- Parts and service is only about 10-15% of the total owning and operating cost.
- Fuel, on the other hand, constitutes 25-35% and
- Tires, some 15-25%.
- The rest would be salaries, insurance, depreciation etc.
Digging further I found that 70% of all unplanned stops can be avoided through proper daily inspections and maintenance. In this case the main cost is not the actual repair but all the other costs. In more than one occasion we had excavators in quarries breaking down while explosives were being loaded and the machine had to be removed before blasting. Similarly if a loader breaks down it could impact the production of some 5-10 trucks or lead to a complete standstill at site. That is expensive.
I also got access to some reports from two different oil analysis companies (one in the US and one in South Africa) talking about the cost of repair before or after failure. By putting the two reports together and then tallying my findings with both companies I found this staggering relationship:
100 If this is the cost of repair after failure, then…
10 is the equivalent cost of repair before failure, and…
1 Is the cost to ensure that the cause that would lead to failure does not occur in the first place.
One example to verify that was from our own operation:
One customer had an issue with a bucket cylinder on an 80 ton excavator. The cost of repair was approximately USD 6,000. He said he could get it fixed for 3,000 at a competing workshop. That workshop turned one of the oil seals the wrong way and caused the entire hydraulic system to fail. Now all of a sudden the repair cost was 60,000. If the customer had focused on storing the oil properly, cleaned the area around the hydraulic oil fill and maintained the hydraulic tank breathers, the first problem could have been avoided. Cost for this would have been less than USD 600. In our part of the world the customer is OK to pay the 100 (even if the try to push it towards 75 or 80), maybe the 10 but never the 1. Why, I’ve not yet been able to find out fully. One indication is that many customers accept to pay for something that is visibly broken but not for something that could break in a week, or a month.
So what does all this has to do with IoT? In my view, everything. In order to help our customers earn money (and hence afford to use our service facilities) we need to focus on avoiding costs that are avoidable, A few examples:
- By training the operators we can easily reduce fuel consumption by some 7-8% (the lowest level we’ve achieved in Dubai. Maximum was well over 30%).
- Again by training the drivers to maintain proper tire pressure and wheel and axle alignments, saving of tire wear of 10%+ is well within reach.
- By getting early warnings (or actively looking for potential issues) we can detect issues before they become disasters. Those issues can be fixed in a planned and systematic way without massive costs caused by disruption of operation etc.
We started focusing on Total Profit of Ownership (rather than the typical Total Cost of Ownership). This principle is very simple: we want the customer to earn more money by using our equipment and services. Not because we’re the cheapest, but because we help them eliminate the element of bad surprises. IoT can help us in achieving that.
A few examples:
- By gathering data about driver behavior we can change the root cause of potential issues at a very early stage,
- Warnings and error codes received on “live” basis can enable us to fix a water pump issue before the entire engine fails (just one example).
- Usage data can enable us to tweak service intervals for different components to ensure the intervals are optimal for current usage.
In addition to the above we use oil analysis on every unit we have on contract. This has enabled us to find out what is going on, and why, inside the main components giving us enough time to fix it before it fails. We have also added drivers training and coaching as an offering and we have in some cases been involved in the recruitment of the customer’s drivers. Over and above this, we’ve also started warranty inspections 1 month before warranty expires in order to actively search for potential issues and fix them before the warranty is over. Very appreciated by our customers.
In my view the biggest gain from IoT is the ability to know what is about to go wrong and then fix it before it really does. This will also give a tremendous boost to your trust building efforts with each customer. It is also important to document the improvements to show the customer how much more uptime the customer has gained.
The key here is uptime:
- Increase in uptime will enable costs to be spread over a larger base leading to a reduction in break-even levels for the customer
- Increase in up-time means fewer resources spent on fixing operational issues enabling the customer to focus on their operation.
- Increase in uptime means the customer is perceived as a more reliable supplier to their customers which will lead to improvements in their business and market position.
The other area we’re currently exploring is how to improve communication with our technicians in the field, using IoT. We have around 25 field service technicians in our organization travelling all over the UAE to service and repair customer machines on site. Historically our communication with them has been sketchy at best. We had no clue where they were, if a job had started and if they were missing some technical information they would generally have to travel back to base to get it. In all, a lot of time was wasted on un-productive trips back and forth making our customers anything but happy.
Some time back we started reviewing what could be done to improve the situation. One of the key problems has been lack of information from the customer about the nature of the problem. Second issue has been trying to know where the technician is, when a job is started etc. Third one has been better communication and the ability to transfer documents and images between the technician and the workshop.
We teamed up with an Indian software provider who has developed a communication system using rugged tablets connected to the GSM network. This device has a built in GPS and camera. They made a software that will enable us to track the technician, we can send service manuals, job cards and other information to them and they can either call us and/or send video clips about the problems they encounter. In addition the customer can sign off field service reports etc. on the tablet and such information can be shared with the customer as well as upload the files against the job card in our central system.
IoT can in my view do a lot to improve your interaction with your customers and help them to save real money and improve your own business. The starting point should be how can IoT help and then build your solution around that instead of just installing cool gadgets.
Lars Moller has over 33 years experience in the commercial vehicle and heavy equipment market, working with or for some of the biggest brands. In the last 20 years he has been focusing on after sales services, with emphasis on turning around loss making service businesses. To date, Lars has turned around 8 loss making workshops transforming them into major revenue generators.
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