Service Parts Management Drives Revenues, Customer Loyalty

Companies using SPM reported an average of a 22 percent reduction in inventory levels, according to Aberdeen report

Atlanta, — October 22, 2003 — Companies employing service parts management (SPM) solutions can turn service parts into a competitive advantage that positively impacts both the top and the bottom lines, according to a recent study from the research firm Aberdeen Group.

In its report entitled: "Service Parts Management: Unlocking the Value and Profits in the Service Chain," Aberdeen highlighted the importance of post-sale service, noting, "Aftermarket parts and services have profit margins as much as 10 times those of the initial product sale — service parts management is the linchpin of any effective service operation."

Globalization, cost pressures and empowered customers are forcing businesses to distinguish themselves on not only product uniqueness, but on the quality and effectiveness of the service delivered after the initial sale of the product, according to Aberdeen.

Increasingly, more revenue, profits and customer loyalty are being driven by after-sale service than by the actual sale of the product. Aberdeen said such factors present a significant opportunity for durable goods manufacturers, service parts suppliers and distributors and maintenance service operators to rapidly improve company profitability.

The study revealed several advantages to using service parts management solutions, including:

  • Reduce Inventory Levels Companies that used discrete service parts management systems reported an average of a 22 percent reduction in inventory levels.

  • Increased Inventory Turns Service parts management application users reported 42 percent higher inventory turn rates than companies not using such systems. Specifically, users of discrete service parts management systems reported an average of 7.9 parts inventory turns per year, versus just 5.6 turns for non-users.

  • Improved Fill Rates First-time fill rates for users of service parts planning and management applications topped 92 percent, on average, compared with an 82 percent fill rate for non-users.

  • Reduced Stock-outs Users of service parts planning and management applications experienced 16 percent fewer stock-outs, on average, than non-users.

Although an increasing number of global companies are using service parts management as a strategic profit driver and source of competitive differentiation, many continue to under-invest in this area.

Additionally, a major finding from the Aberdeen study is that attempts to automate service parts management operations have largely been ad hoc and disconnected, resulting in pockets of automation across the service lifecycle and insufficient ability to integrate and align service information and procedures.

In concluding the report, Aberdeen wrote, "By investing in improving service parts management while others are ignoring it, enterprises can drive customer loyalty, profitability and competitive advantage."