3 Benefits of Inventory Optimization in a Contracting Economy

Around the world, the spread of COVID-19 is creating economic uncertainty for families, communities and businesses. One thing we can all agree on, however, is that we want to emerge from these times sooner, stronger and more resilient than ever.

For Original Equipment Manufacturers (OEMs) and suppliers specifically, decisions they make today will determine how they will succeed in both the near- and long-term. During this time, there is a huge opportunity to optimize after-sales service operations, as it is already a margin-rich side of the business. In today’s landscape, efficient service parts management can provide a competitive edge and drive increased revenue.

To truly unlock value from service parts planning, investment in a sophisticated, cloud-based solution that easily and reliably integrates into existing systems is vital to success. In a world that is always changing, a modern service parts management solution provides the foundation that will accelerate and fuel success for years to come.

Below are three benefits of optimized service parts planning that manufacturers and suppliers can implement today to drive value in a contracting economy:

Avoid Supply Chain Disruption.

According to a recent McKinsey report, OEMs need to understand the extent and likely duration of their supply-chain exposure. The ability to model changes in supplier performance and stocking strategies, as well as increases in desired fill rate projections, will allow the OEM to address these challenges proactively and meet their customers’ needs at a lower cost. Longer term service supply chain stabilization will require updates to service parts demand planning, further network optimization and introducing new levels of repair and remanufacturing. Some of this may be advisable anyway, absent the current crisis, to ensure resilience in their supply chain.

Prepare for the Future.

In some industries, the economic downturn will result in idle equipment and a steep decline in utilization rates. When the economy begins to recover and product utilization rates improve, this equipment will need service before it is back in use and the parts demand for machinery reentering the workforce is an added complexity. This increased demand in service and parts could stress sub-optimized service supply chains and leave revenue and profits on the table. In times of recovery, new product sales often peak, and OEMs that have managed customer needs in the short term will often reap the benefits when these machines are replaced. With an aftermarket-focused service parts planning solution, service teams can more accurately forecast for these upticks in demand.

Accurate Forecasting.

One of the biggest areas of uncertainty currently is customer demand – the service needs of older equipment pressed into service and the lack of new products entering the workforce can challenge forecasting models designed for a manufacturing or distribution paradigm. OEMs and suppliers that have the appropriate technology infrastructure in place can support order visibility, the ability to relax excess stock criteria and redistribution rules, forecast adjustments and simulation capabilities. This will ultimately result in increased financial and operational performance, as well as competitive differentiation.

In an environment where manufacturers and suppliers can expect product-based top-line revenue to decline, after sales service – specifically service parts inventory – must be optimized. Manufacturers and suppliers will need to make sure they have the proper technologies and strategies in place to minimize service disruptions once the world is up and running again.

To learn more about ways service parts inventory optimization can improve financial performance, check out Syncron’s new tip sheet.