Enterprises are becoming increasingly aware of the benefits that a successful service business can bring to driving a solid reputation and future sales.  What was once perceived as a necessary evil is now being identified as an opportunity for growth - the service business offers exciting prospects for those willing to address the issue; namely differentiation in an increasingly commoditised market.

Technology now enables businesses to take a birds-eye view of their service operation in terms of service parts, as well as to hone in on any given item at any given time.  The volume, location and price of service parts can be monitored globally, as can the business' field technicians. 

This information gives businesses the intelligence to ensure that the right part is delivered to the right place, at the right time and with the right engineer.  Real-time information offers the intelligence to audit, plan and forecast for the future - a new and wider perspective on the service business. Companies such as Sun Microsystems and EMC have shown how a strategic approach to service is paying dividends.

The evidence

82 per cent of companies polled by Aberdeen Group ('Convergence of people and parts in the Service Chain', March 2006) said that combining the planning and provision of field technicians and service parts under a strategic service management approach is either 'very' or 'extremely' important to their company's overall performance.
 
The report also highlighted that companies are passing up opportunities to drive service revenues; 69 per cent of the companies polled said that the provisioning of their field technicians and service parts are either loosely aligned or not aligned at all, and are governed by separate sets of workflows and processes.

According to Nigel Montgomery, director of European research at AMR, getting data right was a key step in supply chain optimisation observed in the study.  Without a single view of its data, it is difficult for any business to be more responsive to its customers.

Service - A new role

What technology has enabled service business leaders to do is take a step back from the detail and look more holistically at the service operation. Mundane, day-to-day items, such as service parts planning, are now largely dealt with by technology - and only exceptions require human intervention. This has reduced inventory levels and planning activities whilst improving fill rates and quality of service. Service Level Agreements, previously based on a wing and a prayer, are now based on historical information, predictive modelling and real-time visibility.

Recent innovations have also made it possible to integrate service parts with field service planning in a tightly integrated, single solution to enable companies to effectively manage their two key resources - parts and people. The resulting service level adherement will deliver the right service levels at an optimal price.

To realise these benefits, companies must take a proactive approach, and indeed move towards more pre-emptive processes to ensure the view of service is strategic. By taking this approach, the gains experienced in terms of both profit and performance can be staggering.

The question is: can service managers make the transition too? They now have the opportunity to develop into strategic service officers, to the joint benefit of their personal and their company's development. Their role, once confined to the back offices, is now being projected to the fore as service, and the ability to meet SLAs, takes over from product as the strategic differentiator in purchasing selections. But, in order to reap the benefits, service managers must act now.

Detailed value analysis enables those who want to take the plunge to evaluate the state of play and the likely results, prior to implementation. Typically, companies deploying a service parts management solution should expect their inventory rates to be reduced by 20-60 per cent, fill rates to improve by 7-25 per cent, revenue to increase by 1-3 per cent and gross profits to be boosted by 5-15 per cent.

Good service is as much about risk mitigation as sales promotion.  By committing to a competitive SLA, a business is in effect putting its reputation on the line.  It really has to deliver the goods in order to fulfil the expectations it has set itself for its customers.  Anything less is deemed a failure.

How EMC did it

A recent overhaul of EMC's planning process has shown just how significant the benefits of effective service parts management can be. 

EMC Corporation is the world leader in information storage systems, software, networks and service.  Through acquisitions, the company's service parts inventory grew by 60 per cent in less than two years and included 3,500 discrete parts stored in over 50 countries.  With an expanding multinational customer base, EMC faced the daunting task of managing and optimising its service parts inventory for continued growth and to increase customer service levels. 

EMC needed to automate and integrate its service parts forecasting and planning process on a global scale.  The challenge was to find a system that could manage central and field stocking locations, help the business maintain exceptional customer service levels and integrate with legacy systems whilst at the same time, placing minimal pressure on IT resources.

An integrated service parts management system was implemented to provide a framework to manage these challenges.  The results speak for themselves: the system reduced inventory by $9m, eliminated $1.5m in costs, maintained 98.5 per cent parts availability and increased planner productivity by 40 per cent.  Following implementation of the system, parts accuracy reached 99.9 per cent.

Service as a differentiator

Businesses are benefiting from bringing service and parts logistics under one operational umbrella so that planning, positioning, provisioning and pricing of people and parts happens in unison.  Technology enables the integration and interoperability of data from a variety of sources and the intelligence to plan and forecast as a result.

When service goes strategic, with the integration of parts planning and pricing and workforce scheduling, service levels are optimised, inventory minimised, and profits realised. In a world which is becoming more and more commoditised, with little to differentiate one product from another or even one company from another, service is the key differentiator; and those who provide world-class service will reap world-class rewards. Great servicing of the old drives sales of the new.

Ultimately, service will go strategic.  It is the only way businesses can differentiate themselves in the market.