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Technical Trends: Disruptive Changes Around the Corner?

by Bryant Underwood, Foxconn

Reverse Logistics Magazine, Jan/Feb 2008

RL is unique in business. In almost every case RL Service and Repair is at best an afterthought during a new product development cycle or change in market planning. Anyone with much time in this business has been faced with at least once, an immense challenge from new product launches or some other last minute change. In this ultra-competitive marketplace this is an understandable behavior. It comes from the need to protect new products, their features and designs. Nonetheless, surprises are still tough for RL operations to manage. Because this is how it is, I spent at least some time trying to map out the key drivers for the RL market to ensure we are prepared to provide our Clients with the best possible service options. For 2008, I have identified three interesting emerging trends that have the strong potential to drive disruptive change in RL service.

The End of the Bulk Repair Model?

The trend is clearly, Yes—at least for the main user of the model—cell phone carriers. The first signs were from Google's push for the FCC to require Open-Access in the 700 MHz spectrum auctions. Other hints came from Verizon opening up their network to product not specifically approved by Verizon. But mostly, this will be change based on cost. Bulk repair is a very expensive RL model. There are costs for logistics and inventory in addition to the costs of the repair and refurbishment. Previous thinking was that these costs would just be pushed back onto the OEMs as a warranty charge. However, for the OEMs warranty is a cost that is just loaded into the product price. So ultimately the Wireless Carrier and End Users pay regardless. It is also a process that generates huge amounts of waste from the plastics discarded during refurbishment. This is a large direct cost as well as a growing environmental concern. Plus the warehousing of these parts to support the service channel often creates supply chain issues in manufacturing and shortages in new product for the Carriers to sell. There is also the increasing anxiety over Media/SW Licensing, ID-Theft and Objectionable Content remaining on the phones that are swapped out in the market place. This is a difficult and complex liability problem to solve. However, with same unit repair the majority of these issues just go away.

But the main reason that the bulk RL model will decline is that the usefulness for it has passed. The bulk repair model grew out of the need to ensure End Users had product to generate air time and billing. Having functioning product for what was primarily a business market was the requirement that made bulk repair the solution of choice. That's not the case today. Most/all service plans are flat rate with structures to promote sharing of airtime minutes. The business market is still a major player, but now we have wireless market segmentation any number of demographics including 'tweens.' With the consumers pushing for more freedom and Wireless Carriers looking for more margin, there will be a growing shift to same unit repair.

Form Factor Compression and the Black Hole of Convergence

The phrase 'Killer Product' never had so much meaning as the one it carries for cell phones. Consider for a moment what cell phones have affected or outright devoured;

Many are now predicating that GPS and navigation systems are next. And what a tasty market this is. Data from big box retailers show two major product offerings with double digit year-on-year growth; DLP/LCD/Plasma TVs and Nav Systems. So will GPS go the way of the pager? Maybe—maybe not. One group of thinking sees cell phones as the black hole that will just eat GPS like any other product it has consumed in the past. There are clearly elements of that school of thought that are valid. Just look at the efforts Nokia and Garmin are making to enter cross markets as they expand the capabilities of their products. However, there are barriers to this 'black-hole' strategy.

Form Factor. The big resistance to PDAs being digested into cell phones was the general discomfort people felt with holding what looked like a calculator up to their ears. Then the Bluetooth headset and the proliferation of crack-berry addicts made that an acceptable form factor. However, it is unlikely that cell phones with threaten console gaming. The gaming experience is fully integral to the form factor of the console (at least for now). There is a similar gap with set top boxes and cable receivers. Cell phones already have TV and are delivering content for 'info-tainment snacking.' But it is doubtful that these types of fixed TV installations for homes will be integrated into the cell phone product.

Then there is the case for GPS. Clearly the plurality of the next-gen cell phones will be GPS enabled. But will that kill off the GPS navigation market? It may kill a segment. But the core of navigation has way too much traction to die, but it will change scope. The way it will survive is to become "integrated navigation." In effect resurrecting what many declared a dead product segment-telematics. A current product example gives us insight has to how this segment stays separate from cell phone convergence.

A major automotive manufacturer has in their auto lineup a car with a fully integrated Nav/Braking/Radio/Cruse Control system. The Nav system uses LIDAR (or Radar for some OEMs) to help the other systems make highway travel easier and safer. In one mode you can set the distance to follow a car in front. The system will then monitor traffic data on the broadcast band sub-carrier and control throttle and braking to maintain the distance with margins built in for road/traffic conditions gathered from the Nav system. In one mode if you brake manually to avoid the car in front, the system will monitor the cars behind you and modulate the braking in a way that ensures you are not hit from the front or rear. There are already plans in place to have these systems use road traffic data to not just raise comfort or safety but to improve fuel mileage and reduce emissions. So no, GPS/Nav will not be completely taken over by the mobile form factor but to survive it will become integrated in ways that produce whole new classes of products and service models.

Open Source Hardware

There was a press report from a major US wireless carrier regarding the openness of their wireless networks; when asked about their intent in allowing more 'open-access' to their network, the representative stated that even 'basement built' phones would be allowed on their network. No doubt that there was a great deal of tongue-n-cheek in that statement. The reality however is that there is a growing trend loosely described as proponents of open-source hardware or "Makers." These folks are a very fast growing demographic that are altering and driving significant change in products and the entire service market place. One of the best examples of this, are the various wireless routers intended for home networks. Any number of these routers have a huge range of open source firmware (usually on Linux) ported to them to increase the control and functionality the owner has over the device's function. Some manufactures have recognized this and now have produced routers with optimized memory and ports to allow easy modification. Some have even released source code for their devices to aid the open source development community. The result is that product has much longer presence in the marketplace as an independent user community works to advance and update the product free of charge.

OK, you say that's great for WiFi but things like this do not go on with cellular networks and products—right? Not true. There are several major efforts at developing hardware and software for open source cell phones. The most recent example is Google's Android SDK. A project that even has millions of dollars in prize money for the best developer of phone functionality using Android. Google is not alone. All the other OEMs have similar SDKs that are usually freely available to help drive application development. I have even dabbled in this myself. My daughter uses an electric wheelchair and this year she went off to college. Her mom and I were concerned that she may get her chair stuck or have some type of trouble and not be able to get to her cell phone. So as any dad would, I built a telematics system for her wheelchair. What you see below is the main board as I was finishing the final testing and the device as mounted on her chair.

I took a standard GSM phone, got a pre-paid SIM and connected a micro-controller and two wireless remotes. One on her chair and one she keeps in her purse. If there is a problem she can push the buttons on the remotes and the device will call a local health care provider, then my mobile and then our home, or with another sequence of button presses it will call campus police. When anyone is reached, the unit acts like a standard speakerphone. The joy for me is that it's always on and I never have to worry. With a lot of the documentation that was already on the web it was assembled over a weekend including the time for coding and de-bugging. So in a very short time, at home I was able to develop and deploy a one of a kind wireless product that exactly fit my needs.

Summary

The value of this kind of strategic thinking is not just in the planning, but in the competence it brings to your organization. In addition, as you work with your Clients, it's knowledge like this that brings the relationship closer and you become a true solution partner. From this outline consider some possible actions;

All of this is just part of providing good service and enabling success. Change is always coming, are you ready?

Reverse Logistics Magazine, Jan/Feb 2008


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