Not too long ago, in an industry very close to yours, leading companies squandered millions of dollars in their quest to develop killer new widgets.
While manufacturing garnered all the attention, an unknown, under-invested and lucrative opportunity lay lonely on the service side of the house. Historically, it was all about the sale. Companies focused the majority of their attention and resources on building and selling new products. More recently, with the economy struggling and corporate spending coming to a halt, these same companies have been forced to look for other means of generating revenue and found a major profit lever within their existing service organizations.
"Particularly in industries where service is a critical differentiator, companies are optimizing and automating service parts management to deliver immediate value to service delivery capabilities," said Mark Vigoroso, vice president of post-sales service research at the Aberdeen Group. "As leading service organizations are beginning to realize, optimized service delivery will dramatically impact overall company profitability and performance."
Tapping the Service Parts Opportunity
Supporting Vigoroso's claim, various major enterprises — including the likes of Agilent Technologies, Essel Propack, Equant, Hitachi Data Systems, Lucent, Verizon and Vanguard — have made the strategic decision to focus on generating greater profits, creating a competitive advantage by providing better service and fixing installed base rather than buying new products.
How are they doing this? It begins with service parts.
To maximize the return on investment (ROI) on your service parts endeavors there are three keys that industry observers recommend considering: logistics, planning and order fulfillment.
Getting the Logistics Right
The experts say that the logistics of service parts boils down to applying finite expertise, systems and strategic capabilities to meet the diverse logistics requirements of today's complex service operations. These services must be global in scope, or have the capability to expand globally, and have the scalability to manage this growing industry's real-time service parts demands. By focusing on spare parts management, logistics solutions companies can better service their clients around the clock and around the world.
We're not just talking about getting these parts around the world sometime tomorrow — today's fast-moving enterprises often expect these parts within 24, 12, eight, four and sometimes as little as two hours. For high-tech companies supporting industries such as networking, data storage, telecommunications, medical and computer equipment, spare parts alone can cost hundreds of thousands of dollars. Moreover, the expense of an unavailable part in a machine-down situation for any length of time can mean millions of dollars in lost revenue.
According to the experts, features to consider when looking for a service logistics provider or third-party logistics provider (3PL) are:
- Established vendor with recognizable and referenceable client roster
- 24x7x365 availability
- Global reach, with real-time inventory visibility and access
- Solid same-day transportation solutions
- Globally consistent processes, quality measures and metrics
Of course, companies have been doing these things all along — just not as effectively as possible. Just ask John Guisto, vice president of global services for net.com: "We were running a good program, just not good enough. We needed to tap the expertise of a company that solely focused on service logistics and that was 100 percent dedicated to client satisfaction."
Net.com, which provides platforms for broadband, IP telephony and multi-service networks, last year tapped New York-based Choice Logistics to manage its logistics infrastructure, and so far the company has been happy with the results. "Since tapping the expertise of our third-party logistics provider, net.com's logistics operation is more efficient, supports our overall service delivery and is completely scalable, allowing us to focus on our expertise," Guisto said.