Theory of Constraints Handbook - James Cox Iii [593]
At the same time, warranty expenses are mainly a function of service efficiency, the product quality, and the terms and conditions of the warranty (length in time, limited or full coverage, etc.). While CS determines the first one, the latter two have nothing to do with it. These are determined solely by the company’s business entity, which designs the product and ensures its quality at the exit of the manufacturing gate. Now, all the warranty expenses are kept as expenses belonging to the product business entity, as part of all other expenses (bill of materials, manufacturing expenses, cost of delivery, etc.). The effect of such an approach on the product business entity should be dramatic, especially when the expenses charged in a certain quarter are higher than the product revenues accrued that specific quarter. The pain is sharp and is felt immediately and deeply. In that way, we prevent adding hidden (warranty) burden to the already heavy load of CS expenses. Each unit is measured accurately on what affects it the most.
How to Implement the Change3
As with every major change in an organization, there is no alternative to the managerial leadership. The kind of change needed here will require managerial ownership, as the move is clearly a top-down process. An effort to create a bottom-up process, lead by an ambitious well-wisher, rarely stands a chance of success, as the change may face a hostile reaction.
Key Decisions
Of the multitude of options presented previously, the most important one has to do with the future vision of the CS organization by the company’s management. Will CS be an in-house operation or will it be outsourced? Maybe management should combine the elements of both, creating a unique combination, better suited to the particular environment.
If we keep CS internal, what type of support contract should be the preferred one?
If CS is outsourced, then to whom and how?
Is the current size and mix of support personnel suitable for the future structure? If it is not, what changes are needed?
The standard TOC tools to evaluate proposed solutions—Future Reality Tree (FRT) and Negative Branch Reservation (NBR)—can help quickly screen various solution scenarios. The screening process tries to assess whether the proposed solution can actually resolve existing problems (FRT), without creating even worse new problems (NBR). Only solutions to emerge from both such a screening with flying colors will advance to the implementation phase.
Policies and Measurements
True to the maxim, “Tell me how you measure me, and I’ll tell how I’ll behave,” only if proper measures are adopted can we expect the desired changes to take place relatively fast. On top of the standard TOC measures of CS contribution to the organizational bottom line, through the channels of Throughput, Operating Expenses, and Inventory (Investment), we would like to use operational measures specifically tailored to the CS organization.
The standard measures used in CS relate to the use of different elements of the tech-support system.
1. From the point of view of CS, as usually the service event starts with a call to the Response Center (or Call Center), we would like to know what the Call Avoidance Rate (CAR) is—namely, what fraction of problems were resolved without even calling CS. The better we train the customer on our equipment, the more knowledgeable the customer is, the more available are computerized databases, and the stronger the financial incentives to avoid service calls, the larger this fraction will be. It is a measure not easy to gauge, and to get it necessitates close collaboration with the internal maintenance entity. Usually it will become visible when comparing statistical data regarding similar assemblies of comparable units of equipment.
2. Response Center Absorption Rate is the fraction of service calls that pass