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About the Author

John P. Reichert
WMS Product Marketing Manager
TECSYS Inc.

 

John Reichert is a senior supply chain management expert with a focus on warehouse management systems. His career encompasses more than 25 years of experience; as a consumer and also as a supplier, in product development and management of ERP systems for domestic and international companies in Canada, the U.S., Europe and Asia. Since 1998, Mr. Reichert has been instrumental in providing innovative WMS solutions to Fortune 1000 organizations in healthcare and complex high-volume distribution. Mr. Reichert holds a Bachelor Degree in Engineering and a Master’s Degree in business.

For more information, please visit www.tecsys.com
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Supply Chain Comment

By John P. Reichert, WMS Product Marketing Manager, TECSYS Inc.

December 13 , 2012



Driving Sustainable Service Parts Management - The Last Mile in Brand Loyalty

Performance of a Distribution Network for Service Parts Must be Evaluated on Two Vital Criteria: Response Time and Accuracy


Reichert Says:

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If parts management is not well executed, downtime of expensive equipment in industries such as construction, semiconductor, mining and healthcare is very costly driving up inventory obsolescence to some 10%.
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In a competitive race, such as the Formula 500, starters may be first to go but may not finish, and if they do finish they don’t necessarily finish first. These multimillion dollar drivers represent major brand names in a variety of industries and are given the responsibility and most difficult task to win and project a positive impression on the public.

To win, it is not necessarily always about the highest profile or best known race car or driver; it is about the best strategy, best practice, most appropriate technology and best execution that enable the win at the finish line. If you have watched a Formula 500 race, there is as much, sometimes more, to do off track as there is on track. Drivers’ enabling system, such as visibility and monitoring of every step of execution, help them get to the finish line most efficiently and put them in a position to win. They need a global view of the race, the best tactics to follow at any given moment, when to make the next maintenance stop and more. When they do and execute well on it, with a bit of luck, they will get the checkered flag and may win the race in the last mile.

The “last mile” for manufacturers and distributors is service to customers. It is the ground where battles for customer loyalty are won or lost. Customers’ expectations keep rising; they want service excellence, better quality, better service at a lower cost—anywhere, all the time, on time. For manufacturing and distribution, delivering service excellence is paramount; anything less than 100% in accuracy and ship complete, 100% of the time is not acceptable by customers. Delivering service excellence is central to manufacturers and distributors business models and is one of the strategic initiatives for keeping out the competition and sustaining profitability.

A lot of technology organizations have addressed the human capital management for service calls. Unfortunately this is only half of the problem. Just imagine every time a service professional arriving on site without the right part. For executives the availability of parts on time translates into significantly improved customer satisfaction, sustainability of existing recurring revenue, and growth in the services business.

Today, for manufacturing organizations, service revenues average some 30% of total revenues, but deliver 40-50% of the profits. To this effect, manufacturing and distribution organizations are increasingly looking for ways to automate and efficiently control the flow of service parts. They are focusing on service parts supply management to reduce costs, increase customer loyalty and gain a differentiated value proposition to grow revenue and retain their clients.

If parts management is not well executed, downtime of expensive equipment in industries such as construction, semiconductor, mining and healthcare is very costly driving up inventory obsolescence to some 10%.

In a recent industry research report, the top five barriers to excellence in service parts management include:


 

  1. Reliability and/or long-lead times for delivery of service parts
  2. Outdated technology, and/or inadequate supply chain systems
  3. Lack of visibility of inventory, parts and orders in the services' supply chain
  4. Inadequate planning and/or forecasting of service parts
  5. Inaccuracy in the data of service parts


At the highest level, performance of a distribution network for service parts must be evaluated on two vital criteria: response time and accuracy. In achieving both, resource control and efficiency should include global visibility of inventory/virtual inventory, delivery of spare parts and products wherever they are needed: supply rooms and vehicles, service outlets including self-service kiosk facilities, repair facilities, drop boxes, retails branches and other warehouses. The tools for achieving these objectives should include:

 

Collaborative Visibility

To survive, service parts operations must collaborate across the service supply chain, from suppliers to customers using real-time information sharing from multiple sources in a single actionable environment—in reality, leverage collaborative visibility to manage the logistics’ challenges of service parts and meet customer demands.

 

Demand Management

A demand management system must be a powerful forecasting, requisitioning and planning tool designed to meet the supply needs of service parts operations.  It must be a solution that enables management to optimize their inventory investment, achieve savings in their supply chain execution processes, and improve customer service and satisfaction. Overall, better demand forecasting has been shown to reduce the amount of inventory needed by an impressive 10%-20%, a reduction of 5%-15% in total supply chain costs, and up to a 3% increase in operating margins!

 

Inventory and Warehouse Management

An inventory and warehouse management system must be collaborative and scalable, a robust solution that empowers service parts logistics management to gain control over customers’ service levels, order accuracy, throughput volumes, turnaround times, as well as warehousing costs and certainly profitability.


Up-to-date Technology Platform 

Analysts estimate that industrial equipment makers alone will invest some one billion dollars to overhaul warranty management and spare parts logistics. User companies must adopt a technology platform that is collaborative and scalable in this global economy, and a platform that delivers on the visual needs of today’s users in this Android’s era.

 

Final Thoughts

In conclusion, service parts management is the cornerstone for enabling excellence in service delivery in the last mile for manufacturers and distributors. Just like the Formula 500 race, smartly choosing and deploying the right system and processes to delight the customer can be the enabler or disabler to reach the last mile and getting the checkered flag first for supremacy in your competitive landscape! 


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