By Bill Pollock, chief research officer, The Service Council, www.theservicecouncil.com, firstname.lastname@example.org
According to Strategies For Growth, a recent survey on service parts logistics management shows that it’s a key component of any field service operation.
The results of The Service Council’s 2011 service parts logistics benchmark survey, conducted by official research partner Strategies For Growth, clearly underscore the importance of effective service parts logistics management. In fact, nearly 88% of respondents cite effective service parts logistics management as key to their company’s financial performance, and 93% believe that it also plays a critical role in building customer relationships.
The survey focused on numerous areas, including key market drivers, top organizational challenges, principal actions being taken, and plans for supporting overall field service operations (i.e. through outsourcing).
Key Market Drivers
Nearly two-thirds of survey participants cite both the
need to enhance the customer experience (66%) and
the need to reduce or contain
costs (65%) as the top two drivers
in improving service parts
logistics operations. This corresponds
directly to the findings
of The Service Council's 2011
field service benchmark survey
conducted earlier in the year.
Fifty-one percent also cite the
need to reduce or minimize
service parts inventories as an
important driving factor that
goes directly to the orgnization's
Top Organizational Challenges
However, regardless of how strong a service organization's
performance is, it must still be able to effectively
manage all of the related functions that ultimately support
the customer — including service parts logistics. In fact,
53% of survey respondents identify the need to improve
the speed/velocity of returns as the number one challenge
they currently face with respect to parts management. As
36% of respondents report year-over-year improvement
in the speed of parts returns, it is evident that some organizations
are successfully addressing this key challenge.
Yet, a disappointing 26% of all respondents report that
they either "don't know" or "don't measure" this important
key performance indicator — a critical oversight that
may ultimately inhibit their ability to reduce otherwise
escalating parts-related costs.
Principal Actions Being Taken
Fifty-eight percent of respondents report that they
either have or are in the process of developing standard,
formal processes for managing their organization's
service parts logistics operations. Forty-seven
percent are also focusing on improving spare parts
forecasting and planning, and 42% are investing in
new technologies to automate the reverse logistics
flow. Many respondents that have not yet undertaken
these strategic actions indicate that 2012 will be the
year in which they do so.
Plans to Outsource Service Parts Logistics
The pressures on service organizations with respect
to managing service parts logistics operations are significant
— and not getting any easier. The ability to cut
costs internally is diminishing, and organizations can
ill afford to have their overall customer relationships
suffer as a result of ineffective logistics management.
As a result, a growing number of firms either have outsourced
or are considering outsourcing their service
parts logistics operations to companies that specialize
in parts planning, inventory management, and reverse
logistics. In fact, 67% of those presently supporting their
parts logistics operations through the use of outsourcers
report the need for two or more outsourcers to
handle key portions of their reverse logistics processes.
Choosing the right outsourcer can greatly impact
both customer relationships and the bottom line, so
the evaluation process used to select the appropriate
outsourcer(s) is critical. At 69% response, industry
expertise is the number one factor used in evaluating
outsourcing firms, far eclipsing other factors such as
anticipated outsourcing costs (48%).
The results of the survey also clearly indicate that, while
some of the processes and technologies required to manage
service parts and reverse logistics operations can be
developed and executed internally, many organizations
still opt for the strategic use of highly vetted supply chain
partners to manage these critical activities. However,
regardless of which processes are developed and managed
internally vs. outsourced, one thing remains entirely
clear — simply delivering basic or core capabilities is not
enough to succeed in an increasingly sophisticated global
marketplace. To truly impact the bottom line, enhance
the overall customer experience, and stake out a competitive
advantage, service organizations need to provide
the value-added capabilities desired by customers and
supported through the use of established, well-managed
service parts logistics organizations.