Gene Metheny on 4 Major Trends that Could Fundamentally Change Entire Industries

Over the past few months, we’ve been sharing incredible insights from industry thought leaders into this year’s trends and topics affecting after-sales service. From a deep dive on usership and the share economy, to a review of the major risks in manufacturing, and a look at the shift in the way we view the workforce, our eBook, “2018 After-sales Service Predictions: Strategies for Empowering Manufacturers to Deliver Game-Changing Value,” has given us a wide-eyed view of the year ahead and what it’s going to take to succeed in after-sales service.

As we wrap up the year’s predictions and start focusing on the quarter ahead, we’re passing the mic to Gene Metheny of Carlisle & Company to give us his take on four major trends that could fundamentally change entire industries in 2018. Stay tuned this week for more trend deep dives from Gene Metheny on 3D printing and the effects ecommerce is having on organizations today.

Autonomous Vehicles and the Share Economy

For years, automotive manufacturers have been adding more automation to vehicles, particularly around collision avoidance. These passive technologies, like blind-spot monitoring and backup cameras, are designed to alert drivers of potential hazards, but not take over control of the vehicle. Now, active technologies, which do take control of the vehicle, are becoming more mainstream. By 2030, Carlisle estimates that most of the cars sold will be fully autonomous. So, what does this mean for after-sales service specifically?

Currently, around 30 percent of OEM income comes from replacement parts for crashed vehicles. But increased automation will result in fewer accidents, so manufacturers need to anticipate a drop in demand for crash replacement parts. Higher repair costs associated with sensors and automation will partially offset this reduction, however. Carlisle predicts that by 2022, there will be a 15 percent reduction in crash repair orders, which will result in a four percent reduction in overall part sales. This will lead to declines in warehouse space, warehouse labor and network transportation costs. In 2018 and beyond, this trend will continue to accelerate as vehicles become fully autonomous and vehicle to vehicle communication becomes more prevalent.

In addition, the growth in autonomous vehicles is likely to lead to further vehicle sharing. Companies such as Lyft and Uber can operate much more profitably with driverless vehicles. As transportation options become cheaper and more convenient, people are likely to own fewer vehicles. Fleets will gain a much larger share of the business conducting much of their own maintenance and having more negotiation power over manufacturers.

To combat these trends, vehicle manufacturers need to right-size their networks for the loss in collision volume and develop a strategy for the change in mobility that enables brand differentiation in terms of both vehicle and service. This may require substantial changes to the vehicle distribution and service network.

Telematics

Telematics, or vehicle sensors that send out real-time data regarding vehicle position, performance and service requirements, has been expanding for many years. Most vehicle manufacturers now include fairly sophisticated telematics systems as standard equipment in new vehicles. By monitoring usage and performance data, manufacturers can obtain a host of benefits including improved vehicle quality, faster service response and a more accurate assessment of service market share.

The value of this information increases dramatically as the number of linked vehicles increases. In the past, a combination of owner privacy concerns and the cost of data transmission has hindered progress. Manufacturers have previously tried to sell these solutions to owners to cover the cost of transmission and gain their consent, but the acceptance has been spotty because the end owner only obtains a portion of the total benefits.

Access to this data is essential to address many trends, and manufacturers must find a way to overcome these obstacles. This could mean that they have to assume a larger portion of the data transmission cost, or find ways to address consumer privacy issues while still being able to leverage the benefits of the data.

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Big Data and Predictive Analytics

The time has come for predictive analytics to finally become mainstream in after-sales service. Predictive analytics – the ability to use data to forecast and predict future activities – enables proactive and real-time decision-making and execution. The proactive nature of this strategy makes it a major opportunity for OEMs to streamline operations and improve service.

Several major factors have combined to make this an ideal time to leverage these capabilities. OEMs have acquired more access to dealers’ retail point of sale data, giving them the ability to monitor activity across the supply chain in near real time. In addition, vehicle manufacturers have installed telematics equipment on vehicles and are collecting a stream of data about vehicle and component performance. Combining these new data streams with previously available vehicle and part data gives manufacturers the ability to predict part failures and usage much more accurately. Inexpensive data storage, sophisticated new data analytics techniques and creative applications all support these new capabilities.

The industry is still in the very early stages of managing and leveraging data effectively. To succeed, manufacturers will need to hire more data scientists that specialize in advanced analytical techniques and combine their knowledge-sets with business experts who understand practical applications for the information. Additionally, predictive signals must be incorporated into the core planning and execution systems to provide near real-time service. New systems also need to be developed throughout the extended supply chain, connecting dealers and servicers to the OEM for seamless execution.

Service Lane Technology

For automotive and heavy equipment dealers, dealer management systems (DMS) have been designed to manage every aspect of the dealer’s business. However, over the years, OEMs have continually been adding their own homegrown solutions to the technology stack, ultimately creating a system where dealers are sometimes logging into as many as six disparate systems. Few of these systems are integrated, and OEMs have poor visibility into the service process itself. This negatively impacts both the customer experience and financial performance.

In comes service lane technology, which is designed to take over the role of managing the service process for the dealer. This cloud technology has the potential to be integrated with the various OEM systems, the dealer management systems and the car itself via telematics, all to enable more real-time connectivity and streamline and personalize the service experience.

For example, if a customer is driving and receives an alert (either on their mobile device or on the car’s own smart screen) that their automobile needs repair, they are prompted to schedule an appointment and can do so directly from either the car or their mobile device. The appointment is pre-planned based on available technicians and parts to complete the job. When the customer comes in for maintenance, they are greeted personally with a foreknowledge of their issue, their service history and their service preferences. The technology then guides the service technician through the diagnostic and repair process, integrating the various manufacturer diagnostic, catalog and warranty systems.

Ideally, all of this is done before the part fails. With predictive analytics in place, OEMs will be able to preemptively determine when a part will fail, communicate that to the vehicle, and subsequently schedule a service with the customer, thus eliminating the chance for defection out of the dealer channel.

Currently, the dealer service retention rate (percentage of total non-warranty business) averages around 23 percent for non-luxury vehicles, and 33 percent for luxury. These numbers could drastically improve with the adoption of telematics, Big Data and analytics and service lane technology – ultimately providing exceptional customer service and maximizing the manufacturer’s financial performance.

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Want more insight from Gene Metheny and other industry thought leaders? Download our ebook today to hear more  on the major trends manufacturers will see in 2018 and beyond, and how to implement new business processes and technologies to win.