Spiraling warranty costs are driving growth in early-warning systems for the auto industry, and IT vendors have introduced a new weapon in the battle: text mining.
Text-mining software sorts and analyzes written material quickly, allowing automakers to examine comments written by customers, quality engineers, dealership mechanics and others. The software analyzes text typically found in warranty claims, satisfaction surveys, repair orders and e-mail.
Text mining works in conjunction with software that gathers data into a central database, flags potential problems and alerts those who need to know, such as an engineering team.
All major automakers and suppliers have started using text mining, says the Automotive Industry Action Group (aiag.org), an industry trade group.
Automakers spent $12 billion on warranty costs last year, according to AMR Research Inc. (amrresearch.com), a Boston technology consulting firm. This year the figure is expected to hit $14 billion.
The typical automaker needs 220 days to detect and fix a problem, says AMR analyst Kevin Mixer. By that time, tens of thousands of vehicles could be on the road. The new text-mining software is designed to reduce that time.
It's too early to tell what effect text-mining software will have on the auto industry. But Mixer says it is an important tool to detect warranty problems quickly.
"Companies that successfully mine text submitted from the field will be able to improve product quality faster than the competition," he says.
Industrywide, automakers and suppliers are expected to spend $1 billion on text-mining software this year, Mixer says. A manufacturer can expect to spend at least $400,000 for the software. Considering what's at stake, that could be a bargain - if the technology works.
Text mining got a boost after Congress passed the TREAD Act in 2000. This law requires automakers and suppliers to report warranty claims, consumer complaints and other related data to the government.
Automakers and suppliers have spent more than $2 billion to comply with that law, says AMR.
Vendors selling text-mining software include ClearForest Corp. (clearforest.com) and Attensity Corp. (attensity.com). Before doing business with the auto industry, some of the companies worked with U.S. intelligence agencies (see story above).
A daunting task has emerged, says Pat Snack, a General Motors (gm.com) executive on loan to AIAG. For the system to work, companies must be able to exchange data. For example, an automaker must have the ability to warn a supplier when a component is faulty.
"If you've got different text-mining applications out there that aren't using a standard set of terminology, you'll get different meanings," Snack says.
Given the variety of software products available, that will not be an easy task. But the stakes are high. Morris Brown, product manager of AIAG, points out that warranty cost control will be become even more critical as automakers introduce products more quickly.
Says Brown: "If we don't get our arms around this problem, it's just going to explode."
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