Customer experience, once firmly the domain of the marketing department and, more recently, the Chief Experience Officer, is increasingly becoming a responsibility of the post sales department. After-sales is often where the ongoing customer relationship is forged and interactions with the after-sales team will influence customer loyalty and retention. The challenge for this department is achieving customer satisfaction and profitability.
With durable goods manufacturing declining since the fourth quarter of 2015, demand for after-sales parts is high, and more attention is now focused on this function within a business. Historically, the after-sales function within organisations has tended to focus on schedules and operational productivity but failed to prioritise the customer, according to The Aberdeen Group’s August 2016 report entitled “Service parts management: the aftermarket can’t be an afterthought”. However, forward thinking businesses have realised that providing excellent post sales service is a form of competitive differentiation and source of revenue.
The Aberdeen Group report explains that after-sales service comprises a true understanding of customer needs as well as profit opportunities for the organisation. Margins generated by after-service-related activities can be as much as ten times higher than those of initial product sales.
Customers want higher quality service from the after-sales team, faster resolution and value at the right cost: all possible but not easy! The key to this is understanding demand and managing the supply chain timeline to get inventory levels right. It’s simple: if you cannot supply your customer with the right part when they need it, they will look for it elsewhere. What is less simple is ensuring that all necessary service parts are available when demand patterns for service parts is erratic. Items may not move off the shelf quickly during most of the year then demand may spike for one reason or another – whether seasonality, customer incentives to buy large quantities, or minimum buys. Often the reasons behind these demand spikes go unrecorded or even unnoticed.
Over ordering is just as problematic as not having a part in stock: high levels of unusable or obsolete stock that can cost a company thousands or even millions in warehousing expenses. Informatics Product Marketing Manager Paul Trujillo estimates that the carrying costs for $300,000 worth of inventory are over $60,000 per year. These charges can add up quickly, and over time they will impact a company’s bottom line. Funds are tied up in parts that can’t be sold, and there is less shelf space for more relevant stock.
Tools to maximise opportunities
Managing large inventories and complex supply chains can be daunting and time-consuming. The right tools can automate and simplify the process while yielding greater profitability. The first step is implementing an effective inventory management solution that automatically tracks stock, orders new parts just in time, forecasts accurately, and manages the entire service lifecycle of a manufactured product. The efficiencies created by an inventory management solution alone make it easy to reduce costs and optimise stock levels; service parts management with price optimisation is equally critical to achieving this throughout a supply chain network. It not only impacts profits: it has ramifications throughout the organisation, its distribution network and its customers. It transforms after-sales service processes from reactive to predictive.
The final benefit of better management of aftermarket sales is less tangible, but no less important. As the Aberdeen report reminds us, being customer-centric is also profitable. Customers will be far more satisfied if they receive needed parts, and therefore needed service, without delays or mistakes. They’re also more likely to purchase in the future if they have a positive experience, and they may recommend the brand to other potential customers as a result. For most companies, better service parts management means higher revenue, greater profitability, and over time, a powerful competitive advantage for the company and the brand. In other words, everyone wins.
SHARE THIS POST