How to Build a Strong and Resilient Aftermarket Service Business

Have you ever wondered why the word resilience resonates with so many people? It’s not like we’re all bouncing back from a major trauma or hardship every day, or are we? Perhaps resilience is more than just a buzzword. Maybe it’s a way of life. A mindset. A philosophy. A mantra.

I think resilience is what makes us human.

Resilience was abundant in service and supply chain organisations during the COVID-19 pandemic—the lockdowns, travel restrictions, border closures and health protocols created unprecedented shifts in supply and demand patterns across different regions and industries. Couple these factors with other sources of disruption, such as geopolitical tensions, trade frictions, cyberattacks, natural disasters and climate change. On top of everything else, the ongoing conflict between Russia and Ukraine continues to threaten energy supplies and security in Europe.

Businesses today are comparing their operational impact to their peers and wondering whether they’re alone in facing these challenges. How are other organisations and industries reacting? How do differing geographic nuances come into play? When faced with these questions, businesses need to understand they are not on an island.

These challenges exposed the vulnerabilities of complex, highly globalised supply networks that rely on a limited number of third parties. Many organisations have realised they need to diversify their supply base, reduce their dependence on single sources or regions and increase their regional or local sourcing capabilities. They also recognise the need to invest more in technology solutions, such as digital platforms, advanced analytics and automation tools to improve their visibility, agility and resilience across supply chains.

Exploring whether these issues are global or regional, industry-specific and whether large companies are affected as much as smaller companies are important considerations. Historically, it’s been almost impossible to clearly establish the facts—until now.

Vanson Bourne, an independent market research partner for the global technology sector, surveyed 500 companies in the United States, United Kingdom and Ireland, Germany, Austria, Switzerland and the Nordics. They contacted CIOs, CFOs, vice presidents of supply chains and service leaders to get an unprecedented view of their challenges. In this series of four blogs, we’ll delve into the findings to understand their plans for mitigating global forces and establishing their resilience levels.

Let’s dive into the key findings:

• What’s reassuring (whilst also shocking) is that recessionary forces, labour and talent shortages and the rising cost of working capital are challenges being felt across all geographies and markets.
• 95% of those surveyed agree or strongly agree that they expect to have to trade off the cost of parts with providing great service, with 85% stating that meeting customer expectations is often or always challenging. Covid may have gripped our economies back in 2020, but it’s still wreaking havoc on companies’ operating environments.
• Only 24% of service leaders surveyed are using third-generation, agile SaaS solutions built specifically for service or supply chain. Most organisations (60%) are using non-agile or custom-built solutions instead.

• 99.8% of service leaders agree that spare parts optimization is a challenge they face.
  • Moreover, 99.6% of service leaders agree that they face challenges with spare parts pricing optimization. It’s truly shocking that virtually all 500 respondents are experiencing these significant obstacles.

Service and supply chain organisations face many barriers and trade-offs when trying to transform their operations. One of the biggest challenges is finding and retaining talent with the right skills and capabilities to support their digitisation efforts and advanced planning systems. Another challenge is managing inventory costs while ensuring adequate service levels for customers who expect faster delivery times and more personalised offerings.

We’ll go through these dynamics in our next blog.

What gives hope from the research is that the average margin improvement respondents expect to see if they could invest in operational improvements is 10.5%! Resilience is going to be required in abundance to achieve that number.

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