What are the two biggest costs to a service/after sales organization?
Generally, it’s human resources and the assets used to service those products. In other words: people (technicians/back office) and the spare parts.
Now we often see advice on how to maximize technician utilization. But what I would like to focus on is the impact spare parts and inventory levels have on that workforce and the business in general.
If we look at the challenge around the service/after sales business and the inventory/spare parts, we see that it is managed by two different groups with two differing goals. The service organization wants to increase its first-time fix rate, which generally means maintaining higher inventory levels. The supply chain that owns that inventory is tasked with actually reducing the spare parts levels to free up cash for the company. If these two goals are pursued in isolation, it creates friction between the service organization and the supply chain, and ends up affecting the customer negatively, as well as promoting the “hoarding” technician culture.
The only way to balance this is a partnership where both service/after sales and supply chain can align their goals and understand the impact one group has on the other. After all, service/after sales holds the information to make the supply chain successful, and the supply chain hold the parts to make the service business more cost-effective.
Digital parts management benefits your company by freeing up all that cash held within the inventory assets, minimizing the obsolete spares and potential write offs, which to any business is just the same as throwing cash in the bin.
So, can we reduce inventory and increase first-time fix rates at the same time? The answer is yes, but it requires work and communication. If done right, the internal benefits of lower inventory — meaning higher cash flowmk greater first-time fix rates and more capacity to complete calls with the same human resource — is definitely a win-win situation.
But how? Well, there are many different ways to do this. First and foremost, you need to have a solution that allows you to track and record all the data you need in order to understand what has happened to all of your spare parts and the demand created. Digital parts management benefits your company by freeing up all that cash held within the inventory assets, minimizing the obsolete spares and potential write offs, which to any business is just the same as throwing cash in the bin.
ServiceMax’s Parts Management Module helps companies manage all business processes for parts inventory, including trunk stock management, stock transfers, parts requests and return material authorizations (RMA). From there, you can start to turn your supply chain, which was and probably still is working as an actual demand chain, into a proactive supply chain.
For example, do you have forward stocking locations or trunk/kit stocks for your technicians? If you do, how are these levels set? Many companies allow the technicians to dictate these levels and when they should be replenished. Why don’t we add in some proper controls, set minimum or maximum levels and a set time during the week that your technician gets replenished?
Parts that don’t move past ‘X’ time get returned, or even better, utilize a planning tool to actually set the levels for you and remove the guesstimate approach. Now the supply chain can manage the demand coming through their supply centers, maximizing the efficiency of their staff while at the same time, making sure the technicians carry the correct level of parts to maximize their first-time fix rate.
Now you need to make sure you have a good returns process (RMA) as technicians will always need a method to return the parts they do not use or no longer need. These parts can be re-used elsewhere, making sure you optimize that inventory, do not waste money, and give the supply chain the purchase avoidance they need.
So, what have you now created? A partnership between two areas that previously may not have been aligned — service and supply chain. In many companies the service organization will actually be supply chain’s biggest customer after manufacturing. Who knew that the supply chain could get so much benefit out of a solution that helps your service workforce? If used correctly, as can be seen by the Pitney Bowes whitepaper, you can create great benefits for the business, the employees, and the customer. Higher first-time fix rates and better spare parts visibility means greater productivity for your customer, resulting in greater satisfaction.
To learn more about parts management, click here.