As a service leader, have you ever wondered why you feel that your inventory and logistics provider is more of a reactive ‘demand’ chain rather than a proactive ‘supply’ chain? This is often the case with many businesses. Internal goals are not always aligned; service needs a higher first-time fix while the supply chain needs lower inventory to release cash into the business. The supply chain goals may be aligned to the sales department rather than service.
Generally, the supply chain accesses two points of data and from this, they are supposed to support the service business in an efficient and timely manner. These are normally an order from the technician, “I need this part now,” or—if you are lucky enough to have a tool that creates replenishment stocks—you may be using consumption history to trigger a replenishment order. In today’s world, these are not sufficient to deliver the required levels by your customers or your service business.
So, how do we get supply chain and service units working together and sharing common goals and KPIs to benefit the company?
Asset Data Visibility Breaks Down Silos
Does the supply chain know what asset data you collect? If not, it’s time to share the data you collect and work together to understand which data can benefit both sets of goals. But what data should you share? The following four data points are the best place to start to benefit both supply chain and service unit goals, as well as your customers.
Install Base: Providing install base data allows the supply chain to see the spread of your assets so they can understand where it is best to position the inventory to ensure parts are available in the correct locations to best support your products. For old or new products, having this information in real-time allows the supply chain to either ramp up stocks as a new product range is launched or reduce inventory at the same rate as old product ranges are reaching their end of service. For new products, having the right inventory on hand reduces the instance of stock outages which can create a lot of customer and technician frustration. At the other end of the lifecycle, write-offs and obsolete inventory are a big cost and have significant bottom-line impacts on your business. Impacting these is a win-win for both the service and the supply chain business.
Preventive Maintenance Plans: This information is simple to share but often gets overlooked—and the impact is major. Knowing when preventive maintenance work is due, and the parts associated with planned work, allows the supply chain to proactively plan the inventory needed and ensure that the inventory is delivered to technicians via cost-effective shipping. Without this proactive link, technicians are reactively ordering PM kits and will typically require expedited shipping to ensure these parts are onsite when needed. This has been done extremely well with some of our customers. For example, one customer started using a PM engine and created each PM work order at 12-month intervals or ‘X’ cycles in advance. This plan was then provided to the supply chain which allowed them to follow the exact path I highlighted above. This matured over time and allowed the company to no longer stock any of these parts and directly ship the PM kits to either the customer site or a technician stocking location. This resulted in a huge reduction in inventory, and a corresponding reduction in freight, stocking, human resource, and warehouse fees. Again, a win-win for both service and supply chain.
Contracts: For more mature companies, adding contract visibility to your install base allows the supply chain to plan parts availability with criticality and entitlement consideration in mind. The priority established by contracts can then be adhered to with the aid of the supply chain. In a simple example, if you had a stock shortage and only had a part available to fix one machine, you would want to prioritize that part for a contract customer with the uptime clause and a potential penalty, as opposed to a non-contract Time & Material customer. Also, in the same way as Install Base data, this additional information helps the supply chain position the inventory in the right place to meet the projected demand and reduces the potential impact of missing an agreed entitlement.
Case/Work Orders Closed: Imagine a technician orders a part to fix a fault but it’s not currently available, so he checks with other technicians in the area and ultimately uses one of their transferred parts to fix the issue. Case/Work Order closed, everything finished, right? The answer: No. The part that was originally on back order gets shipped to the customer 5 days later. The customer now has no issues and puts the part in the drawer for when the technician arrives next. Six months pass by and on the technician’s next stock audit, they are blamed for a lost part. This is upsetting as the technician has never had access to the part. Regardless, the part is written off and the cost hits the bottom line. However, a simple process of deleting all backorders once a case is closed solves this problem. One would think that this would be a simple fix, but you would be very surprised at how often this happens and that the impact not only hits the bottom line but leads to a disgruntled employee workforce. Think about if this occurs at your organization, you will be surprised.
Good Communication is Key
Even if you think you have good communication with your supply chain, the reality is that probably aren’t communicating enough. Get the supply chain on ride-along with your techs, and vice versa. Let techs know what it is like to deal with vendors, lead times, and no real forecast of usage except for historical consumption. Find common ground and use asset data to hit mutual benefits. Ensure that everyone in both supply chain, service, and all other units understands each other’s KPIs and goals and where their actions impact the metrics of others negatively and positively. More importantly, make sure stakeholders are aware of how their goals align with the overall company goals.
As you look to break down silos and bring together service and supply chain, keep these considerations in mind:
- What asset data do you currently collect as a service organization?
- From this asset data, what do you share with your colleagues and partners in the supply chain?
- Do you know how your supply chain counterparts are measured? Do they know how you are measured?
- Communicate more than you are doing now. Be the pro-active partner.