Spare Parts and Logistics
Within broader servitization initiatives, after-sales or “after-market” services constitute a strategic anchor for most manufacturing and engineering companies aiming at a mix of maximizing customer loyalty and retention, generating revenue streams and profits from the installed base and protecting the brand. Within these services spare parts play a crucial role: On the one hand they usually deliver the bulk of profits for suppliers and their potential is often perceived as low hanging fruit; On the other they can be a serious source of contention and dissatisfaction for customers, if they are perceived to be causes of excessive and very expensive downtimes and high, often unjustifiable costs -imposed by vendors from a position of strength.
Situations like these can often cause significant reputational damage and harm the business in a broader sense, often in non-obvious ways, one example being the fact that many customers buy critical spares at the time of purchase of the main equipment at prices significantly lower than after market prices, effectively depriving the vendor of future profits.
In spite of delivering relatively high profits by product standards (a wrong comparison) most spare parts businesses are underperforming. Many companies underinvest in spare parts capabilities, accepting the existing situation as good enough. They fail therefore to capitalize not only on a major profit opportunity, but also deprive themselves of competitive advantage.
Spare parts are a crucial link / intersection between products (source for improving product quality) and services and strong capabilities can play a major role in a company’s ability to design strong service offerings, improve profitability and enhance its competitive position.
We help our clients leverage spare parts for competitive advantage across the whole parts value chain. We work with them to design parts strategies and offerings and improve customer retention while enhancing profitability. Furthermore we help clients rationalize investment in the parts business, strengthen its organization, improve information flows and cooperation with product and service units, upgrade supply chain capabilities and logistics concepts, and optimize pricing.
Our portfolio includes:
- Demand management and modelling
- Supply chain: Concepts, models, strategy and operations
- Engineering, sourcing and procurement
- Inventory management
- Logistics and distribution; Field Service integration
- Product Lifecycle Management
- Repair operations
- Management processes and systems
- Marketing and Sales
- Offerings (packages, insurance, stock pools)
- New channels to market
Results: We drive higher revenues, improved profitability and better customer satisfaction. Our clients experience on the operational side lower sourcing costs, better inventory turns, less obsolescence, lower logistics costs, higher service levels (improved delivery accuracy, shorter delivery times, …