Today’s modern manufacturing organizations and OEMs leaders have learned to look at their service business as a profit center instead of a cost center. Service and parts sales are not only essential for higher customer value and customer retention but it is a highly profitable business if leveraged & managed correctly.
OEMs are still intimidated by the spare parts management process as the majority of them are still managing their spares through spreadsheets and ERP systems.
Now, we understand the love for spreadsheets – they are virtually free, widely available, and easily manageable with minimum training. But it cannot handle the complex requirements of spare parts planning. Also, the top ERP systems including SAP, Oracle, Epicor, Microsoft Dynamics do an excellent job of tracking carrying costs and part locations but they are designed to handle operational processes for you and not designed to equip you with effective spare parts management strategies. Here’s why:
- ERP Systems cannot differentiate between parts:
As an ERP system sees all parts the same without considering service-specific variables such as lifecycle, customer importance, impact on safety, and criticality, it cannot differentiate between parts. To an ERP, the only difference between a carburetor and a brake pad is the cost. Now as these service factors are critical to the service level that you are aiming for, an effective service parts management solution needs to factor in these variables before developing stocking strategies.
The main impact of this is that the ERP system cannot fully optimize the tradeoff between the costs of carrying inventory and maintaining the service level you’re trying to achieve. As mentioned above, ERP systems, carburetors, and brake pads are the same but in reality that is not the case. Brake pads can be inspected to understand the wear and tear and hence can be planned whereas carburetors can fail without a warning. Without this strategic understanding between different parts, an ERP system can recommend extremely expensive stocking decisions forcing you to inventory excess parts for a given fill rate.
- ERP Systems cannot leverage the power of connected assets:
Different utilization factors like operating temperature, humidity, indoor/outdoor operating locations, geographic location, and other factors impact the rate at which parts fail. The only way to understand this is to leverage the power of IoT and capture data from the sensors installed on the assets. ERP systems are not designed to factor these variables into planning and stocking strategies.
An effective service parts management solution with an ability to manage connected assets along with an IoT for service strategy can gather information from your assets to understand and forecast part failures and recommend stocking strategies.
- ERP Systems cannot relate fill rates with asset uptime
There can be instances when your organization might fall short of service level agreement even after maintaining descent on-shelf availability. This happens when you stock the wrong parts or stock the right parts at the wrong locations.
ERP systems do not have the mechanism to plan inventory according to uptime targets and the parts lifecycle information within service bills of materials. All they can do is a plan for part availability per part request. To correlate fill rates with service level agreements across multiple accounts, you need a solution that can calculate how certain parts impact a system’s uptime.
- ERP Systems are not designed to help optimize service parts pricing
Service parts pricing is an elaborate topic wherein the right price for the given spare/service part is decided for maximum sales volume and highest profitability.
A number of factors go into deciding the right price including manufacturing cost, competition, brand loyalty and criticality of the part. The complex algorithm needed and the scope for such a solution is more than what an ERP is designed to handle.
With an advanced service parts management tool you can leverage service parts pricing solution to enhance your part sales and profitability.
- ERP systems cannot manage inventory according to service contracts
When managed correctly, your service business can be extremely profitable. In a typical organization, wherein the service revenue only represents about 25% of the overall revenue – it can contribute to 40% – 80% of the total profits.
So, when you have a system that can forecast, optimize, and adjust part inventories to support service level agreements, you can ensure that your maintenance organization has the materials they need to keep equipment up and running. This can help boost your top and bottom line helping you make your service business as the star profit center instead of a cost centric liability.
Need Help with Service Parts Management at your Organization?
Genius Business Solutions is a proud partner with PTC. PTC is a market leader in IT Solutions for CAD, PLM and SLM- Service LifeCycle Management. We help manufacturing organizations and OEMs license, implement, optimize and maintain PTC’s SLM solutions including PTC SPM – Service Parts Management solution. This solution helps you accurately forecast part demands, recommend the best stocking strategies, improve service levels, parts availability, and reduce repair, ordering and expediting costs.
Contact us today at ContactUs@GeniusBSI.com or call us on +1 (309) 517-2427 to learn more.
Visit http://geniusbsi.com/spm/ to learn more Service Parts Management
