Smart Phones Need Smart Aftermarket Value Chains
Posted by Eoghan Dillon on Wed, Jun 30, 2010 @ 09:53 AM
Earlier this month, I attended the Reverse Logistics Association (RLA) conference in Amsterdam. The event was well attended by many thought leaders in the reverse logistics/aftermarket sector.
Reverse logistics for the mobile phone industry was a key topic discussed during the event. In particular, the increase in popularity of smart phones has given OEMs major cause for concern. Key components in smart phones, such as the touch screen, can cost in excess of $100. The market is also becoming more competitive and margins are getting thinner. Higher-priced components in these devices equate to higher repair costs. And thinner margins mean that aftermarket service costs have a stronger impact on the bottom line.
The challenge to OEMs is how to give the same level of customer service that consumers are used to, while keeping costs low.
One area the OEMs are focusing on is consistency of service. A presenter from Nokia mentioned that in a survey it was found that consumers are happy to wait for up to a week for their phone to be repaired if they are guaranteed to get it back in the agreed time. This was surprising to me, but the fact that most people now have a spare mobile in a drawer at home most likely has a lot to do with this finding. Customer expectations on turnaround time may push toward more regional repair models where phones can be repaired in a few high-volume repair centers.
The largest area for saving is reducing the need to return the mobile handset to be repaired. Consider “no trouble found” (NTF) product as the low hanging fruit. Accenture estimates that 68 percent of returned product is characterized as NTF, accounting for as much as 20 percent of the total cost. The front line in reducing these returns is on the web channel. By completing diagnostics online and connecting the phone to a computer, firmware can be re-flashed immediately. In a presentation I watched at the RLA event, I learned that firmware flashing currently accounts for more than 30 percent of NTF repairs. Using the Internet to help customers update firmware can reduce repair and freight costs because the activity returns the product to working order immediately.
Online returns portals empower customers to streamline the returns process when initial diagnostics indicate the phone requires repair. The end-user gains visibility to the returns process and is able to make informed choices. Call center use is minimized and the customer feels more in control. One trend discussed at the RLA event gives customers more options in an online return portal so they have control over the speed of the process. For example, if the product needs to be repaired, the customer can choose to pay for a faster turnaround time or the use of a borrowed phone while his handset is being repaired. Use of an online interface also enables the customer to remain informed throughout the repair process without the need to call customer service for a status check on the device.
So how will these trends affect aftermarket service providers? First, they will need to be web-enabled so they can link the front end to back-end repairs. The website should be flexible and be able to self-diagnose problems. If the problem persists, the site must be able to create a Return Material Authorization (RMA) for the client and provide a menu of options to return the product, as well as some extra services if the customer requires faster turnaround. Aftermarket companies will also have to proactively analyze the repair yields of the phones so that they can look for fixes that can be solved online rather than returned directly.
Does anyone have any comments or see other interesting trends in smart phone repair?