5 Ways Optimized Service Parts Management Improves Financial Performance
Companies around the world are increasingly dealing with the vagaries in the economy as they relate to the ups and downs of their industries. This creates feelings of uncertainty and stress for both employees and customers. Manufacturers must ensure they have near- and long-term strategies in place that support increased financial and operational performance, exceptional customer experiences, and competitive differentiation.
Aftermarket service is already a margin-rich side of the business, however service parts management is often sub-optimized. In today’s landscape, efficient service parts management can provide a competitive edge and drive increased revenue. Optimized service parts management will increasingly be a margin-contributing differentiator that might make the difference between program success or failure.
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.
Throughout the service parts planning process, look for opportunities to improve data quality, raise forecasting accuracy, reduce internal lead times, and automate routine processes to reduce safety stock, improve productivity, and raise fill rates. These improvements, both incremental and significant, will ultimately lead to improved financial performance.
Here’s how to get started:
1. Generate and Analyze Demand-Related Data
Data from previous events and situations can enable manufacturers to make future, smart decisions. Examples of demand-related data include shipment history, install base data, machine and sensor data, and part supersession chains, among others. Analyzing this level of information is entirely too complex to do manually, but with a cloud-based service parts management system, planners can understand variations in different demand streams to make more strategic decisions – ultimately resulting in improved forecasting.
2. Automate Forecasting
Leverage demand-related data to make predictions and recommendations, using advanced statistical algorithms. Examples include causal forecasting, lifecycle planning, sporadic and low volume demand, and more. In a sub-optimized organization, errors in forecasting can result in unnecessarily inflated safety stock levels, but a modern solution automates and improves forecasting which results in decreased carrying costs and reduced excess and/or obsolete stock.
3. Determine the Optimal Quantity and Stocking Locations
Traditionally, dealers and planners overstock parts to avoid low first-time fill rates. However, optimizing the inventory planning process not only provides a clearer view into the entire process, but also reduces safety stock and internal transportation costs – ultimately resulting in margin improvements.
4. Identify the Most Cost-Effective Solution
Efficient procurement planning helps to find the least expensive options for executing an inventory plan. With a sophisticated solution, rebalancing, repairs, and other factors are considered, and the system avoids unnecessary transportation costs, procurement costs, and more. The system provides optimal inventory for each stocking location, ensuring customer expectations are met while improving the bottom line.
5. Update Your Execution Planning Process
When deciding which orders for the ERP system to execute, they can be set up to run manually or automatically according to a business’ specific rules. Optimized execution planning increases planner efficiency, decreases human error (which almost always results in excess inventory), and ultimately improves financial performance.
To truly unlock value from service parts planning, investment in a modern, cloud-based solution that easily and reliably integrates into existing systems is vital to success. In a world that is always changing, a sophisticated service parts management solution provides the foundation that will accelerate and fuel success for years to come.