Service Matters from MCA Solutions

One of our recent posts discussed the results from our survey of senior executives at leading companies and the impact on specific industries where aftermarket customer service support is mission critical. 

While responses and conditions varied across companies and industries, we found many common themes that are likely relevant to all companies in today's turbulent economic environment.

Service executives are facing increased pressure to drive revenue from parts and support contract sales, even as they lower the costs of providing such services.  This requires delivering more effective service management solutions to customers.  In order to do that, companies need:

• More responsive forecasting. Companies need to respond quickly to reductions (and eventual upticks) in demand with more responsive forecasting at both the part and aggregate levels.   Enhanced forecasts must be based on a blend of historical time series and economic causal analysis.
• Expanded service offerings. Companies need to design and deploy new service product offerings to meet customer demand for more comprehensive and efficient service support programs.  This requires tools, such as advanced inventory management methods to help end customers take inventory off of their books, and methodologies for analyzing performance-based contracts intended to align supplier and customer incentives.
• Network re-design. Massive changes in customer demands for support, and their willingness to pay for different levels of responsiveness could require significant re-structuring of locations, capabilities and connections for the aftermarket service supply chain network.  Companies need cost-effective tools to analyze needs for distribution and repair depots, trading off operating costs with the need to meet response time requirements.
• What-if business scenario planning. Service suppliers need to extend their planning horizons beyond the next quarter or the current budget year.  This requires access to planning support tools that can analyze alternative business scenarios at a strategic level.  Companies will have to generate forecasts of the cost and service impacts of the introduction of new service offerings, adjustment and refinement (through more detailed segmentation) of customer service levels, budget reductions, changes to supply chain configurations, and shifting supplier relationships.  
• Product lifecycle management. Companies need to analyze the impact of end-of-production decisions on final lifetime part purchases as product lifecycles are extended.  As the movement to performance-based contracting extends, there will also be a strong incentives to upgrade the reliability of existing parts leading to more frequent and complex part supercession changes.

As aftermarket support services become even more important, the capabilities noted above will become essential for the long-term survival of service providers.

The impact of the recession on the service business of manufacturing companies varies on the industry.  In a follow-up post, we will discuss several how several industries, including semiconductor equipment, medical equipment, and aerospace and defense, are coping in this environment.

Service Management 365 just published an interview with Jean-Pascal Bobst talking about the expansion of their service business and the long term plan for continued investment in technologies that will deliver efficiencies to their business.  Mr. Bobst is the CEO of the Bobst Group (http://www.bobst.com/), a $1.3B revenue market-leading Swiss company that manufactures and services packaging equipment globally.  In the article, Bobst discusses the evolution of their service business and the major gains in efficiency they have gained in efficiency through implementation of service planning software.

Mr. Bobst was the executive sponsor of the project which involved consolidation of the global support organization through integration of MCA's Service Planning and Optimization suite () with multiple ERP systems across the Bobst businesses.  The single integrated system is now tracking and planning hundred thousands of parts worldwide, with strategic forecasting for long-term performance improvement.

The success of the project is a credit to the executive involvement at the highest level and the recognition that service performance is critical to the long term success of the company.  

What is unfortunate is that despite the compelling importance of service for manufacturing companies, not more CEO's are driving continued investment in service.  Morris Cohen's whitepaper on "The Value of Service in a Down Economy" describes why service is important, especially in this economy and lists six specific areas of opportunity to generate revenue and reduce costs and is something you can send to your executives to help make a case for continued investment in service initiatives.   A summary of some of the key initiatives:

• Create new service offerings:  Customers have widely varying needs for service.  Determine the potential cost and profitability of service offerings and put in place programs that will increase customer satisfaction and drive revenue.
• Optimization matters:  Multi-echelon inventory optimization developed for service parts environments can reduce inventory to significantly lower levels than traditional planning tools and dramatically increase working capital.
• Outsource non critical functions:  Logistics has been a typical area for outsourcing, consider outsourcing areas like application management through Software as a Service (SaaS) offerings that bring faster time to value with fewer IT resources

Aftermarket service does indeed matter to manufacturing companies, and we will do what we can to make sure that more CEO's realize it as Mr. Bobst does.

We recently co-authored an article published in Industry Week with our partner Axeda titled "Remote Service: Optimizing Spare Parts Inventory for Manufacturers."  The article focuses on the challenges of managing the service business and how remote service can help maintain high levels of uptime for supported equipment.

Remote service, (remote monitoring of equipment at customer sites to proactively respond to service needs) has become a standard in certain industries, such as complex medical equipment, and a competitive differentiator in others.   Since acquiring Questra, Axeda has become the market leader with a broad customer base. 

As the article notes, advanced users of remote service software are leveraging data to better manage service events and parts inventory in the following ways:

• Using data captured on equipment configuration and operating parameters to feed spares forecasting systems to better forecast inventory requirements
• Proactively diagnosing potential equipment problems and planning service events so that material can be positioned in advance of the event rather than expedited after the on-site diagnosis
• Remotely repairing problems through software fixes rather than dispatching a field engineer

Gerber Scientific, using an integrated approach to remote service and spare parts planning, can more accurately identify problems and expects to reduce the amount of floating inventory, ultimately reducing storage costs. With better mean time to repair (MTTR) data, there's also an opportunity to increase response times and reduce system downtime for Gerber's customers.