Service Support Department at Air Solutions - Case Study Example

Quality and Logistics Case Study Objective: To consider the operations of a spares supply and service support department at Air Solutions. Introduction Air Solutions is proud to have today reached the league of the top three manufacturers of air conditioning units and compressors globally. From our modest beginnings, in 1994, we have today grown into a full fledged company manufacturing total air conditioning solutions. Air Solutions has the resources to offer each and every customer the very best technological advances in compressors and ancillary equipment technology backed with a service operation and after sales department designed to ensure total peace of mind with every product we supply. We offer specialist capabilities and product ranges to meet the specification of complete air systems installation and pipeworking as well as for hydraulic systems, vacuum pumps and ancillary equipment.2 Analysis of Situation Air Solutions is considering a setting up of a spares supply and service support department. Here we will discuss the feasibility of the same. Keeping in sync with technology is of utmost importance to any industry, especially in the consumer industry. Air Solutions made major improvements in industrial air compressors within four years of its launch by the company in 1994.Similarly, in the case of HACU (Heavy duty air conditioning unit), the product was updated in 1996, eight years after its launch in 1996.This was accompanied by a massive advertising campaign. There were minor design changes in 1999, to improve the product. Thus, Air Solutions has been keen to match up to consumer preferences and update its products even before the standard ten-year operating life for which the product has been designed. The company believes in catering to well-informed consumers and spends on advertising campaigns about new product launches. A constant sales figures of 12000 units of IAC and HACU per annum prove the constant demand for these products. Providing timely and necessary service support also form a key deciding factor while a consumer researches and zeros in on the company to buy the product from. Consumer service, not only before or during the sale of the product, but also after sales service play a vital role in determining the reputation and sales volumes of the company's products. While supply of spares and post sales support can provide an additional business opportunity, it might be a drain on the reserves and logistics of the company. Typically, engineering, especially air conditioning companies introduce a product with an anticipated operating life of ten years. However, due to various market factors, these might sometimes be used for more than thirty years. Now, if the product is more than ten years old and has been replaced by a newer version, then there is little that a spares and support system can do to help the customer. Oftentimes, the cost of replacing the spares is a massive proportion of the cost of the product itself. In such a scenario, the customer might be advised to go in for a new product itself, instead of trying to repair the existing product. According to the leading website on air-conditioning, heaters and refrigerators, "Variable Frequency Drives Running on Bypass Can Waste 56 Percent or More Energy for Your Air Handling System. Despite the economic advantages and significant energy savings available by using AC variable frequency drives (VFDs) in HVAC applications, many building operators do not repair or replace drives when they fail since the motors can easily continue to run through a bypass contactor. While this is a great solution for short-term outages, continued operation in this mode quickly becomes a very expensive way to operate a fan."1 Strategy The strategy to make the most of the spares and sales support department would be to: (i) Strategically locate these warehouses Proposed Locations: Manchester, Birmingham, London, Singapore, Europe, U.S, Africa 1) at the site of production of IAC and HACU ie. one at Manchester and another at Birmingham 2) one each in London, Europe, U.S, Africa and South East Asia that would typically be a part of the showroom activities. When a consumer buys a product, it is easier to directly contact the company staff for any clarifications or after sales services. This is better than going through a dealer or contractor, as that would not only be time-consuming, but also not guarantee best results. The dealers/ contractors might have earmarked their own margins or might be interested in pushing a product that gives them a higher margin on the profit. While the sales staff might be sourced according to the showroom's needs, each showroom could have a skeletal support staff of one or two professionally trained engineers, who can handle any repairs or replacements. (ii) Strategically Obtaining Supplies Spares supplies would have to be genuine and with warranty. This might be a costly affair if the product itself is not in production after a few years. Generally, spare parts of new air conditioning units cannot be used in older models. Thus, it might be a better idea to consider replacing the unit with a new one than continuing to manufacture spares and increase the company's costs and inventory. A solution to this problem could be to sub contract this manufacturing of spares to a firm in South east Asia, maybe Malaysia or India, where the cost of manufacturing would be substantially low, as compared to the cost of production in the U.K. However, there would have to be stringent quality checks and the company might have to compromise on the warranty for the spares. (iii) Influence of Reliability of product on Supply Operation If the reliability of a product is high, the consumer might not mind waiting for a slightly longer time to get a genuine product or spare. Thus, if given a choice of replacing a part with a locally manufactured one in a day's time or a genuine part sourced directly from the company in a month's time, the consumer might want to wait for the genuine product. But, here we are discussing heavy duty and industrial air-conditioners, the non-functioning of which might affect the consumer's industry and production process in turn. Thus, not wanting to suffer additional losses, the client might choose to opt for a local part that is not manufactured, but supplied by a reputed company. So, it is a feasible proposition to start a spares and sales support department. (iv) Design Information and Updates Of all the factors influencing the performance of the sales support staff, in depth and up-to-date knowledge of the product line is most vital. It is an embarrassing situation when a customer walks up to the staff and specifies the details of a product and the staff looks on with a blank expression. The sales support staff can make or break the image of the company. Thus, the staff must be constantly updated on the product line, not only about the products already in the market, but also the product line that is about to be launched. The staff must have shop floor experience of at least an year or two, other than a background in marketing. A training course to familiarize the support staff with new products and innovations in the products, not just by Air Systems, but by competitors also, could be conducted by the company on an annual basis. (v) Estimating Demand for Different Part types Since the products were launched in 1988 and 1994, a survey (online would be most economical as compared to a postal or telephonic one) among the consumers would help establish the demand for different types of spares. Thus would in turn influence the production of spares. The technical team would be familiar with the vulnerable parts and might like to suggest parts that might need to be replaced often. Also students of related courses might be able to suggest the same. (vi) Complete kits Complete kits might be a combination of various spares that have been replaced often and in many units. Thus, it might be more cost effective if complete kits are manufactured by the factories at Manchester and Birmingham and sent along with the new units when they are shipped to the global markets. As this might be a costly affair, it would be advisable to manufacture these complete kits in limited quantities, maybe 10% of the total units being sent for sales. (vii) Scrapping Obsolete Parts As an air conditioning unit is built to last 10-15 years, it might not be logical to expect the customer to upgrade to a newer model every time one is launched in the market. However, if there is something like an exchange offer where a customer can trade his older model for a newer one and also get a good discount on the price of the one, the sales might rise considerably. Now, coming to the subject of parts, scrapping of obsolete parts might prove a problem for the support staff. Who would have the time to dispose of the replaced parts of serviced air conditioning units after they have been replaced These might just create an environmental hazard for the consumer himself. (viii)Declaring a part Obsolete If a part is not used in the newer version of the same product, but undergoes certain design changes, it might be time to call it obsolete. Thus, while the possibility of opening a department for spares and support staff is certainly there, the RoI(returns on investment) in terms of hiring staff, cost of training,s shipping and complete kit costs etc. might not be positive considering the global recession and downturn in the economy at present. It might be wise to defer the project till a suitable time when the global economy recovers and demand spurts up. References 1.the News " Four Steps to Reduce HVAC Energy Cost", March 6, 2006 http://www.achrnews.com/Articles/Technical/8c808b127a67a010VgnVCM100000f932a8c0 2. Homepage, http://www.air-solutions.co.uk/ Read More