Software project will save Ford tens of millions a year in car repair bills

Creating a single warranty system

Ford began considering alternatives to its ageing warranty system, known as the Global Automated Claim Entry System (Gaces) in 2005.

At the time, Ford’s brands included Land Rover, Jaguar, Mazda, Volvo and Aston Martin, but each used different technology to manage warranty repairs, making it difficult to collate information centrally.

“Every day sooner that you know about a problem, you can save one day’s worth of bad production. Every day has a huge cost saving associated with it”

Mike Roberts, Ford

“They all had different systems, so the goal was to get them on to one common system around the world, so that is what we set out to do,” says Roberts.

Ford began by comparing notes with rival motor manufacturers on their warranty systems. Other motor manufacturers were happy to co-operate, and to share non-commercially sensitive information, says Roberts.

“We looked at John Deere, we looked at Caterpillar, we talked to GM, we talked to Chrysler, Toyota, basically talked to everybody we could, to find out what their systems were capable of doing,” says Roberts.

The group ran a series of focus groups with its dealers in Europe and North America to find out what they thought of Gaces and how they would like to see the system improved.

“One of the common sentiments was, ‘Don’t change it because I know how to get my claims paid’, even though they were working on a green screen,” says Roberts.

But other dealers were able to point to features in other motor manufacturers’ software that made their jobs easier. They included the ability for dealers to keep track of their repair claims, or to receive up-to-date technical information on vehicles from the manufacturer.

Limitations of existing system

Ford realised that one the biggest problems with Gaces was that it automatically truncated the technical repair reports submitted by the dealers to just 250 characters.

That meant Ford only received a fraction of the technical details for each repair, so valuable comments from technicians and engineers were lost. In one case, a dealer told how his technician had written a 12-page repair report, but had no easy way of sharing that with the motor company.

“All that wealth of data, we never saw. We operated for years like that, with all this wealth of customer and technical data just evaporating. That was a wasted opportunity,” says Roberts.

Another drawback was that Ford had no way of knowing how long each vehicle had been in the garage for repairs. Dealers could only send a repair date and the mileage of each vehicle, and that made it difficult to check the validity of repair claims.

Dealers might be over-claiming, they might be over-repairing, claiming additional time, or claiming for unnecessary hire car costs while the vehicle is being repaired, says Roberts. “Not knowing how long the car is in the shop, we are not sure if it’s a legitimate claim or not.”  

Warranty taskforce

Ford put together a working group, which eventually included six business people and over seven IT specialists, to develop a better BPM system.

The group spent two months developing an outline specification for the new software in 2007. The replacement for Gaces needed to flexible enough to handle changes in legislation in every country. It also had to be flexible enough to manage software updates, as vehicles become increasingly reliant on electronics.

“We knew that the vehicles were going to be more complex, repairs were starting to shift from purely mechanical repairs to electrical repairs, where we upgrade the software in the module instead of just replacing the brake,” says Roberts.

Funding delays fuel drive for rapid savings

The project team approached Ford’s executive board for approval in 2007. But with the motor industry facing tough market conditions, the board chose to keep the project team running, but deferred funding for 12 months.

“They said, ‘We are not going to fund it, but we will fund your team for another year. At end of the year you will owe us $10m, so go and figure out how you are going to save us that much money’,” Roberts recalls.

Original system diagram for Ford’s One Warranty Solution (Vehicle Inquiry module has been deferred to a later date)

Ford’s warranty team decided to move ahead with some “quick hit” projects that would bring rapid savings. The team looked at the feasibility of Ford’s IT team building a warranty system in Java. It also evaluated off-the-shelf warranty software from several suppliers. It became clear they were all built around a central business rules engine.

Rather than buy in the commercial software, Ford chose to buy and configure a business rules engine from business process management specialist Pegasystems.

“We did a bake-off, or a proof of concept, with four different business rules engine companies. And Pega was the clear winner,” says Roberts

It took Ford four months to integrate its new business rules engine with the Gaces system.

Repair intelligence shared company-wide

The project led to immediate improvements, including a new capability to alert Ford engineers when vehicles arrive at a dealer for servicing with a problem that is of particular interest to the car manufacturer.

Previously, Ford engineers had to ring around dealers they knew to ask them to call when a car arrived with a problem they wanted to investigate, but it was a hit and miss process.

“Using our new system, we were able to connect that engineer to dealership, to a technician, to a vehicle that had that exact concern, the minute it was written up on the service drive. He could intercept the repair process and talk to the technician,” says Roberts.

The team wrote up 30 case studies that showed how Ford’s engineers were able to use the new platform to intercept repairs and gather crucial technical information two months earlier than was possible with Gaces alone.

“They got information they just never would have gotten, had they just waited for the claim,” says Roberts.

Assessing claim legitimacy

The team also designed a way of risk scoring each repair claim, to assess whether claims were legitimate. “We looked at out-of-range claims and claims that were unusually expensive, unusually high on labour and number of parts, or that used parts that no-one else did,” says Roberts.

The redesigned system is able to divert unusual claims to administrators for manual assessment, leading to substantial savings. “We don’t want to cheat the dealer – we want to make sure we are paying them the right amount, but we don’t want to pay a penny more than what we should be paying,” he says.

Warranty benchmarking study

To bolster the business case, the team hired consultancy Snap-on Business Solutions to compare the way Ford manages its warranties with other businesses.

It found that the automotive industry lagged behind in warranty management, and that Ford lagged within the automotive industry.

“That little phrase went in all of our governance decks, so we had the results of the benchmarking study and key features other firms’ warranty systems had that we did not have,” says Roberts.

Key features and benefits of Ford's integrated warranty management system

The team presented the benchmarking study, together with a new business case, to Ford’s executive board in late 2008. “We did a very thorough business case. We looked at all elements that would help Ford save money,” says Roberts.

The presentation included a “traffic light” diagram that compared the key features of other companies’ warranty systems with Ford’s. That really got the board’s attention, says Roberts.

“People said, ‘Look how we lag with the competitors, we need to do something’.”

Back to Pegasystems after false start

The company carried out a proof of concept development with one supplier in late 2009 and early 2010, but after months of development it became clear the project was not going to fly.

“After six months of development, it did not work. The response time was terrible and it would not scale. So we threw all that work out,” says Roberts.

Meanwhile, Pegasystems had begun its own project to develop a warranty framework for insurance companies. Ford saw an opportunity to use the technology as the basis of its own warranty system.

As part of the deal, Pegasystems moved some of its senior staff, led by its chief solutions architect June Dyer, to Ford’s factory complex in Michigan to work on the project for eight months.

“In exchange for us being an early customer, Pegasystems made a lot of concessions for us. That includes putting some of these senior people on the ground to help us,” says Roberts.

Addressing unexpected complexities

The project team, based in the US, decided to launch a pilot programme in Europe by the end of 2011, and selected Ireland for the work. The aim was to show that the project would benefit Ford around the world, not just in the US, says Roberts.

The pilot set out to demonstrate a limited number of the functions of the OWS warranty system. In particular, it included a module to provide dealers with more information on vehicles, such as the warranty start date, build information, information on the customers and whether there were any product recalls on the vehicle.

Ford achieved its goal, but the pilot showed that the project was far more complex than the team had anticipated. Some of the overseas car markets had unique warranty requirements. For example, all cars in Norway come with a five-year warranty.

“We realised there were a lot more complexities out there than we had planned for and we needed more money,” says Roberts.

Roberts had no choice but to go back to the board in 2012 and ask for more investment. It was, says Roberts, the worst year of his life. A series of meetings with senior executives followed and the request went all the way up to Ford’s CEO, Allan Mulally.

“I was in his operating committee, asking for more money, with Lewis Booth, financial officer of the company, sticking his finger in my face saying, ‘Why did you let this programme get so far off track?’,” he recalls.

Strategic partners speed development

The team decided to halt development for the year, and to re-scope and simplify the project. The company took a strategic decision to outsource the development work to a systems integrator, on a fixed-price contract.

Indian supplier Tech Mahindra, a partner of Pegasystems, won the contract following a competition with five rival companies, and came on board in 2012.

Ford has also been working with Indian systems integrator Wipro to update the dealer management systems (DMS) used by its dealers worldwide to integrate them with the OWS. The work involved co-ordinating with 170 DMS suppliers to remotely update the dealers’ systems.

“All the DMSs will be sending the claims [using the] same data, same format, same interface,” says Roberts. “We can track what version of the software the dealer is on, and we have validated that they have all done the necessary updates.”

Phased roll-out to complete by 2018

Rather than launch again in Europe, Ford opted to re-launch in North America first to be closer to the project team. The move made sense, as it would allow Ford to roll out the technology more quickly, says Roberts.

“North America was paying for most of the development, so they should see all the benefits first,” he says.

Ford plans to roll out OWS gradually, starting with five dealers in North America in August 2015. It will then expand to 20 dealers over three months, followed by a region-by-region roll-out across North America between November 2015 and April 2016.

Europe will follow in the second half of 2016, and is expected to take 12 months. Dealers in South America and Asia-Pacific will follow, with the software fully deployed by 2018.

Integrated system adds efficiency

The OWS will bring together a wide range of information on vehicles, including details of parts, prices and repairs, from separate databases onto a single system. “It makes the system much more efficient, much more effective. It's an integrated system,” says Roberts.

It will provide dealers with more accurate information and allow them to process warranty claims more quickly. Today administrators file a claim one day, leave their files on their desks overnight, and have to wait unto the following day to find out if the claim has been approved.

We don’t want to cheat the dealer – we want to make sure we are paying them the right amount, but we don’t want to pay a penny more than what we should be paying

OWS will allow them to file a claim and receive a status report back the same day. “Now they can get that claim to a final status quickly, and put the file away,” says Roberts.

OWS will also allow technicians to file much more detailed information about repairs. They will be able to attach pictures of difficult repairs, and copies of bills for work subcontracted to other garages, to replace a windscreen or a radio, for example.

“We are emailing, faxing or scanning them today. In future, they will be attached to the claim [on the system],” says Roberts.

Future developments

Ford plans to develop OWS further so that, rather than asking technicians to type technical data into the computer system, they will be able to download data directly from the car.

Roberts says he hopes to reach a point where a car's mileage is no longer manually added to the claim, but a tool is simply plugged in which allows Ford to log the mileage from the module. “That is accurate information,” he says.

Logistical and technical challenges

One of the biggest challenges in the project has been reaching an agreement on the requirements of the warranty claims system between different parts of Ford worldwide.

“Trying to get global agreement on how the system is going to operate, how it functions, how it makes decisions, and turning a global agreement on just takes forever,” says Roberts.

Some things were impossible to agree. For example, the parts numbering systems in North America was completely different from the parts numbering system in Europe and Asia-Pacific. There was no alternative but to have different versions of the software.

The team is wrestling with a number of technical challenges. One is how much capacity to build into the system. “We know how many claims are going to come in, but we don’t know in a real-time system whether everyone will be filing claims at the same time of day or throughout the day,” says Roberts.

Another problem is how to give dealers the ability to update historic claims held on the previous Cobol system. “That is plaguing us right now,” says Roberts.

Finding developers with advanced Pega skills has also proved difficult. Tech Mahindra was able to bring Pega developers into the project, and Ford has trained a lot of the company’s staff in Pega skills, but retaining them has not been easy, says Roberts.

“We have lost a lot of good people because they get trained and they get a year of development, then they get sucked up by another company,” says Roberts

Lessons learned

Although the project has, ultimately, proved successful, Roberts says if he were to do the work again he would simplify the project at an earlier stage.

“There are areas of incredible complexity. I would have taken them out of scope and done more phasing of the project to get the base system up and out quicker,” he says.

“It gets the system out there, and lets us start using it. Then you just prioritise everything else and do your build order from a priority standpoint.”

Roberts’ advice to other organisations embarking on similar projects is to find a good systems integrator and to get a working version of the software out there as quickly as possible.

“Find a really good integrator, get your scope as small as you can get it, and then get it smaller. Get something out of the door you can start working on,” he says.

The project has attracted interest from other motor manufacturers, including Nissan, which is working with Pegasystems on its own warranty system.