Rethinking the Role of Parts: Lessons from the Service Council™ Smarter Services™ IdeaShare
I recently had the chance to join a Service Council IdeaShare alongside a group of service leaders from across manufacturing industries. In a virtual roundtable format, senior service and aftermarket executives discussed the familiar—but often underexplored—topic of service parts management and, more specifically, what’s changing in how the service supply chain is managed.
What we heard in the IdeaShare was clear. When parts management is treated as a back-office function, the goal is efficiency: minimize cost, reduce waste, keep inventory lean. But that mindset no longer fits the realities of today’s service business. As manufacturers increasingly look to their service organizations to supply steady revenue, they find that service parts are a critical enabler of increased customer loyalty and improved business performance.
Service Org Structure Reflects True Priorities
One of the most interesting parts of the discussion was hearing how different organizations structure their parts operations and how much that structure influences outcomes.
Some run fully integrated models, with parts closely aligned to service execution. Others have carved out standalone parts businesses with their own P&L, teams, and tools, leaving service execution entirely to third parties.
The integrated approach offers stronger coordination across service, product, and sales, helping ensure that parts strategies stay connected to frontline needs. But it can also lead to blurred ownership or slower decision-making if priorities aren’t clearly defined.
Standalone parts businesses can typically move faster and operate with a sharper commercial focus. The trade-off is higher risk of missing opportunities to increase customer loyalty. Service outcomes like first-time fix rates or SLA performance benefit from coordinated parts planning, but can’t improve when parts availability is far removed from day-to-day service operations.
There’s no single right answer that suits every business, but the companies seeing the most impact seem to be doing two things well:
First, they’re segmenting work. Transactional tasks like quoting and order entry are centralized, automated, or offshored, freeing up internal teams to focus on higher-value areas like lifecycle planning and dealer engagement.
Second, they’re designing handoffs and systems intentionally, so the customer experience doesn’t fall through the cracks.
In other words, they’re treating structure not just as an org chart, but as a value generation engine.
Customer Loyalty Is Built on Trust and Availability
Trust was another recurring theme in the discussion—not as a soft concept, but as something rooted in day-to-day service performance. It’s the natural outcome of consistency and reliability.
Customers want more than to know a service part is available. They want lead times to match what’s promised, technicians to show up ready to complete the work, and the confidence that the part is reliable, safe, and compatible.
When the experience doesn’t meet those expectations, that trust breaks down quickly, and the impact is immediate.
One leader shared a story about an e-commerce platform update that unintentionally made it harder for loyal customers to find parts, resulting in fewer orders and more frustrated customers. Getting it right for customers is more than supply chain planning OR inventory management OR service scheduling—it’s these things AND thinking across the entire service lifecycle from the customer’s point of view. Digital transformation must follow customer logic, not just internal process.
Pricing Strategy Is Evolving
Many of the attendees also shared how their approach to pricing is maturing. It’s no longer just about staying competitive; it’s about aligning pricing with value and using it as a lever to manage service parts inventory.
That might mean:
- Using inventory-driven pricing for end-of-life or at-risk parts
- Factoring in part criticality and installed base maturity
- Segmenting pricing models by customer behavior or contract type
There’s growing interest in AI-enabled pricing, but also recognition that it only works if the underlying data is clean and accessible. Service and aftermarket leaders are customer-facing and often engaging with the customer in a moment of crisis. Their take on AI is highly pragmatic.
What matters most is having the visibility and collaboration needed to act quickly, especially across commercial, service, and supply chain functions. Data availability, and, secondly, integration, remain blockers for many.
The Dealer Dilemma
Several participants talked about the pressure coming from suppliers who try to sell directly into the OEM’s installed base, often at lower prices, leading to channel conflict, margin erosion, and strained dealer relationships.
Many OEMs are responding by embedding stricter terms into supplier contracts, including exclusivity clauses, serialization requirements, and private-label agreements to protect their branded footprint. Others are leaning on long-term service contracts to lock in parts consumption and reduce the temptation to look elsewhere.
But playing defense in the dealer channel can be an endless and convoluted pursuit and isn’t always effective. A charm offensive— giving dealers a reason to stay loyal—is increasingly attractive to OEMs who rely on dealers for frontline sales and service, and could use an ally to safeguard their business from competitors.
Treating dealer networks as collaborative partners rather than transactional channels improves service parts availability and supply chain transparency. It also reinforces the value that only the OEM can offer, across warranties, engineering expertise, certified parts, and predictable outcomes.
The Shift in Service Parts
The biggest aha moment from the IdeaShare wasn’t just the shift in how service parts are managed—it was the shift in how they’re valued.
More and more, parts strategy is business strategy. It’s about revenue growth, not just cost control. And it’s being shaped by people who understand that operational excellence and commercial success are two sides of the same coin. It’s less and less relevant who is turning the wrench or who is stocking the part: what matters is the customer holding the wallet.
The full IdeaShare report captures many of these themes in greater depth, and features additional research and commentary from Service Council, and I’d recommend it to anyone thinking seriously about improving commercial performance in their service organization.