COMPUTERWORLD PHILIPPINES - Electrolux At Your Service
By Peter S. Cohen
ELECTROLUX, based in Stockholm, Sweden, is a world leader in household appliances, such as refrigerators and washing machines, with revenues in 2004 of $17 billion. To keep its customers satisfied, Electrolux provides after-purchase service through a network of independent warranty service providers. Facing opportunities to improve this service chain, Electrolux changed its business processes to create shared “win-win” gains with its service providers and customers in several areas:
• Inventory. Through better forecasting of service repair supply demand, Electrolux was able to minimize its inventory carrying costs for repair parts.
• Manufacturing. By tracing each service claim back to its production line, Electrolux was able to fix manufacturing and product design problems that caused the service problems in the first place – thereby lowering its costs and improving overall customer satisfaction
• Warranty Service Providers. By enabling warranty service providers to enter claims and reimbursement requests online, Electrolux issued payments faster, which made service providers more satisfied and more responsive, for better customer service.
• Customers. By surveying customers after their service experience, Electrolux stayed in better touch with customers and provided measures for managing service providers. This enabled the service providers delivering higher quality to excel – a “win-win” for service providers, customers, and Electrolux.
Electrolux used service management software from ServiceBench to implement these changes beginning in 2000. Electrolux continues to expand its implementation of ServiceBench today, which indicates that the software is part of a long-term Electrolux strategy to keep its market share leadership.
ServiceBench (www.servicebench.com) provides service supply chain management applications for manufacturers, distributors, extended warranty providers and service providers. Its products automate warranty claims administration, parts ordering, service dispatch, product registration management and service network management.
Electrolux chose ServiceBench over two other vendors.
According to Jane Pearson-Wray, Consumer Services Group administrator, Electrolux also considered software from Key Prestige and, later, EDS EClaims. Electrolux chose ServiceBench over these other vendors for three main reasons:
• As a new company, ServiceBench could offer Electrolux more flexibility;
• ServiceBench’s product was considered to be more cost-effective; and
• ServiceBench’s product could perform the functions that Electrolux needed – online processing, real-time claim status, and robust reporting capabilities.
The ServiceBench software enabled Electrolux to gain substantial performance improvements in terms of both lower warranty expense and lower rates of service errors. To explore how Electrolux achieved these improvements, we examine “before” and “after” snapshots of two of its business processes:
• The cost process – spanning its suppliers, its manufacturing operation, and its warranty service providers – which determines Electrolux’s warranty expense; and
• The service process – spanning its claims processing, its warranty service providers, and its customers – which drives its customer service quality.
Before implementing ServiceBench, Electrolux’s cost process had some costly weaknesses. Specifically, Electrolux lacked feedback loops to provide information across functions:
• Electrolux’s manufacturing and product design functions received limited claims data from the warranty service providers, so Electrolux had a more labor-intensive analysis process of warranty claims, delaying its ability to take action.
• Electrolux’s purchasing department and its suppliers did not receive claims data on a regular basis, slowing down the process of knowing which parts were in high or low demand. As a result, Electrolux incurred excess carrying costs for parts that were not in demand, and risked running out of the most needed parts.
Using ServiceBench, Electrolux was able to create formal feedback loops that generate the information needed to make decisions that reduce costs while enhancing performance. Cost-reducing feedback loops achieved the following:
• Electrolux is now able to pinpoint the source of claims problems back to a specific part of Electrolux’s manufacturing line; and
• Electrolux can better match parts supply with demand by tracking actual use of service parts and building more accurate forecasts of service parts demand.
The results have been positive. These feedback loops made Electrolux and its partners and customers better off in the following ways:
• Customers. By making products with higher quality and delivering the right repair parts to its warranty service providers, Electrolux enhances its perceived value to customers. And when products do require service, they can be repaired faster and more efficiently. As a result, customers are more satisfied with Electrolux’s products, its warranty service and its overall brand.
• Service Providers. Better availability of repair parts enables warranty service providers to increase the percentage of claims service calls that they resolve the first time, enabling them to do more business.
• Electrolux. Better manufacturing and product design lowers Electrolux’s warranty costs, and more accurate parts forecasting reduces its inventory costs. Of course, Electrolux also benefits from its improved reputation for service.
Before using ServiceBench, Electrolux’s service process had gaps that created inefficiencies. Electrolux’s manual processes created errors and delays between Electrolux and its service providers, which could cause some service providers to shift their primary focus away from Electrolux’s customers. The former process was slow and prone to error:
• Service providers filled in by hand standard industry warranty claims forms and mailed them to Electrolux.
• Electrolux checked claims for errors and fraud, delaying service provider reimbursement substantially.
• Service providers would often need to contact Electrolux multiple times for claim status updates, payment status and correction of claims.
Using ServiceBench, Electrolux was able to create formal feedback loops that enhanced service quality. ServiceBench enabled Electrolux to create an improved business process:
• Service providers enter reimbursement requests and file claims online – enabling them to review claims, payment details, and reports.
• The system audits claims and then pays service providers.
• The system surveys customer on their satisfaction – making the survey results available to Electrolux’s service providers.
• The system scores service providers on quality and efficiency of service, leading to rewards for service providers and better management of the service network for Electrolux.
The outcome has been positive. These feedback loops create benefits for Electrolux and its partners:
• Customers benefit because clear performance feedback motivates warranty service providers to deliver better service to Electrolux customers.
• Service providers benefit because they can qualify for financial rewards by delivering quality and efficiency.
• Electrolux benefits by identifying its top-performing service providers, so it can reward and retain them, which ultimately leads to happier customers and higher profitability.
In working with ServiceBench, Electrolux has learned important lessons, which according to Pearson-Wray, include the following:
• Know your vision. Electrolux knows is it very important to service providers and parts distributors to have a hassle-free process for claims submission and prompt payment for services rendered. Successful ServiceBench implementation depends on defining warranty rules completely and implementing them systematically.
• Cost savings can be significant. Between 2000 and 2005, Electrolux’s warranty cost per unit fell between $2 and $4 depending on the product. This decline was due to better service and product quality, fewer frivolous claims, and more effective use of Electrolux’s audit team to review questionable claims.
Thanks to ServiceBench, Electrolux is at your service more than ever.
