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September 23, 2019 | 5 Mins Read

4 Reasons Why Your Service Supply Chain is Failing

September 23, 2019 | 5 Mins Read

4 Reasons Why Your Service Supply Chain is Failing


By Tom Paquin

Last week at the Service Council Symposium, I had the opportunity to host a roundtable discussion with several service leaders on the topic of the service supply chain and reverse logistics.

As we went around the room and each person shared the current state of parts management across their organization, I couldn’t help my surprise at the immaturity of some of their systems. This reinforced a belief that I’ve had for a long time: When businesses are thinking about service transformation, they’re not thinking about service holistically. They’re thinking about the binary relationship between customers and technicians, and, because of that, the operational underpinnings that actually make a service business work—like parts—are neglected. Is that true of everyone? Obviously not, but this roundtable represented service leaders with not just the forethought to attend a service technology summit, but also the forethought to sign up for a reverse logistics roundtable. Imagine what this looks like for the service leaders who opted to answer emails rather than attend the session! I wish I could say that there’s a long list of “To-Dos” that came out of this session, but what it pretty starkly illuminated, instead, were some of the failure points that businesses were running into. Here are some key elements that will have a negative effect on your ability to manage your service supply chain effectively.

You Don’t Have a Clear Path to End-of-Life for your Serviceable Assets

They don’t make them the way that they used to, right? Apparently so, since some businesses are still servicing 75-year-old machines with cast iron parts manufactured in a warehouse that was converted into condos in 2004. Because of this, organizations are forced to carry excess inventory on-hand (since they obviously can’t reorder these parts), which stretches the concept of “aging inventory” beyond the average lifespan of most mammals. That is an extreme example, but consider the other extreme: Cell phone manufacturers sunset their assets after five years. That means that each year, as the number of skus or service parts increase for new products, you drop close to the same number of skus for end-of-life. Perhaps we can find a happy medium between five years and seventy-five years. Here’s an idea—Each year, increase the part value for repair parts by, say 5% for each part used, and set an additional rule that, once a repair costs 50% of the price of a new machine, that product is automatically sunsetted. With that, you’ll clear inventory space, and you’ll sell new units!

Your Technicians Are Hoarders

I recently reorganized a drawer in my kitchen. In said drawer, I found thirteen wooden spoons that my wife and I have apparently accumulated over the years. We registered for exactly one when we got married, bought several of them, and have received more than one as gifts (thanks?). I was thinking about that, as one member of the roundtable told me that some of his technicians touch certain parts exactly one time a year, when they run inventory on their trucks. The kicker—this organizations’ #1 reason for failed first-time resolution? The technician didn’t have the parts they needed on the truck. Fixing this requires thoughtful internal governance—and a good piece of parts management technology—to make sure that if parts aren’t used in an allotted time, they’re offloaded to a warehouse, sent to a higher-volume branch, or returned wholesale, clearing up shelf space for parts that they will actually use. There are a lot of variances to this that are worth discussing, including peak seasons and routine visits, but that’s why it’s important to have a complete picture of your service business.

You Have Dealer Disconnect

There are two different types of dealers that we’ll talk about here. One would be the dealers from which you are buying parts, the other is the dealers who use your parts to conduct service. We will start with the latter of the two. When you work with a dealer network, in many instances, they’re buying service parts from you, at which point the parts might completely leave your system. There’s a lot of trust, then, that they’re delivering on aftermarket service appropriately. And that’s fine, but as the old adage goes, Trust, but verify. The solution, generally, is to gain some oversight into the operations of your dealer network. The silver bullet is having them employ an extension of your parts management system. That can be like herding cats, sure, but if you start small and build out there is a proven pathway to success, there. Now on to the former: When you’re being supplied with parts from a dealer, there are some complex ins and outs to consider. For example, one leader talked about how they have a system to manage parts brought in from all dealers except for one. For that one dealer—they purchase parts only when they need them. This creates a massive logistical asynchronicity that serves to arbitrarily inflate time to resolution for any repair that requires one category of parts. They do this because of the cost-prohibitive nature of the one line. They simply can’t afford aging inventory of that part category. The solution here is smarter forecasting, which will help to mitigate aging inventory. Buy what you know you’ll need each month, get it in your system, and make it available on demand.

You Lack the Right Tech

We’ve tiptoed around this over the course of this article, but I’ll leave you with one last story from the conference. A utility company, who oversees a global network of branches, dispatches a person to do cycle counts once a week to reorder parts. Well—not real cycle counts, as much as they look into each of the 300 bins that parts are in and make sure they’re at least half full. When I heard that, I nearly fell out of my seat. Imagine how simple it would be to make that process so much more efficient from an accuracy and manpower perspective with technology. A fuller, more accurate, and more automated picture of parts management and reverse logistics has the capacity to make a huge impact on your bottom line. As we often say around here, though, technology in and of itself is not enough. The managerial will, and technician buy-in is key to ensuring that the pieces actually work. Parts management in particular is tricky because any break in the chain breaks down the machine, and often requires multiple stakeholders be involved, often some from outside of your business. Because of that, any tech implementation should be managed with a solid implementation partner. There are many other things that we can discuss beyond this, such as parts disposal, refurbs, and how your inventory is distributed, but I know that for many businesses, they can’t have those discussions until they feel comfortable that the basic underpinnings of parts management are in place. Start there, and plan to build on it.