Optimizing Parts Availability While Controlling Inventory Costs

Is the pre-Covid 19 service supply chain dead? Do we need a new paradigm for the future?

Sometimes we forget painful memories. In easier times when service supply chains are running smoothly, leadership might ignore the importance of dual sourcing, having appropriate safety-stock levels, and making investments for shorter lead times. This may also lead them to forget about the need to invest in technology for automation, visibility, and predictability. These investments may seem like “fat” when things are going well and some leaders struggle to justify them, prioritizing cost-cutting instead.

When disruptions happened in the past, such as the Japanese Tsunami in 2011, the Taiwan floods in 2009, or the Longshoreman strike in 2014, they localized supply and demand effects on certain regions and specific commodities. Service supply chain leaders applied band-aids. What we experienced with Covid in 2020 is something totally different: The world came to a grinding halt. Manufacturing facilities shut down, raw material supply was affected, demand started to whiplash, and then other disruptions piled on, like the shutting of the Suez Canal and the invasion of Ukraine.

Based on what our customers are saying, we do see a paradigm shift happening in a couple of areas. The first includes investments to build resiliency—often in technology to get more predictive and identify supply chain breakages before they occur. We are also seeing more investment in IoT or improving remote diagnostics. Our team at Baxter Planning is always working to help our customers shift the paradigm. In fact, earlier this year we launched our newest solution, LynX by Baxter Planning, which helps service supply chains build resiliency by proactively managing all order workflows from the first mile to the final mile. There’s lots more to come, too. I’m really looking forward to seeing how this space changes in the next ten to fifteen years.

In the unending journey to improve first-time fix rates, how are service supply chains looking to improve?

A repeat visit occurs when the technician can’t solve the issue on the first visit. This can be due to many reasons such as the skills or qualifications of the technician, but let’s examine it from a parts standpoint. When the part is not available, there’s simply no way that repair will happen. To improve first-time fix rates, here are my three recommendations:

  1. Invest in better integration of Field Service Management (FSM) and Service Parts Planning (SPP) systems to help ensure the qualified tech is only dispatched when the needed service part is available.
  2. Closely monitor the part order workflow from Distribution Centers (DC) to where the technician intercepts the part. By tracking through systems, you can alert the technician earlier if there’s going to be a potential breakage.
  3. Invest to improve the inventory plan because none of these things will work if the parts you need aren’t available.

Sustainability and circularity: What is the relevance to the service supply chain?

The key strategic imperatives our customers are discussing most in the post-Covid era are resiliency, digitization, and sustainability. There’s a lot the service supply chain can do from a sustainability or circularity standpoint.

Getting defective parts back and repairing them improves the ratio of Return and Repair versus New Buy. It’s not only good for the environment but great financially. We also love helping customers improve their sustainability index by reducing excess or obsolete parts inventory, reducing Next Flight Out (NFO) rates due to poor planning, reducing repeat tech visits, and many more. So that’s the good part: Many sustainability-related activities also save the organization money.

The bad part is that we are not seeing a lot of investment in activities that are good from a sustainability standpoint—the program might cost money to set up or the return on investment might be very long. There are clear opportunities for service supply chains to claim a leadership position in this area and I wouldn’t be surprised if we see more progress here in the next one to five years.

We covered even more in the webinar and I encourage you to listen to it here. I look forward to joining our friends at ServiceMax for more thought leadership discussions in the near future.

ABOUT Rohit Joshi

Avatar photoRohit Joshi is the SVP of supply chain transformation at Baxter Planning. Rohit has a demonstrated 21+ year history of working in the hi-tech industry and supply chain digital solution sales in leadership roles. He is skilled in Operations Management, Supply/demand planning, Supply Chain Optimization, Transportation, 3PL management, S&OP/IBP, Six Sigma, Strategic Sourcing, Change Management, Sales & Marketing, and Go-to-market strategy. He received a Master's degree focused in Management Systems from Virginia Polytechnic Institute and State University.