With the orders of durable goods fluctuating around the globe, manufacturers are looking for new ways to impact revenue and profits, and the avenue that’s standing out most is streamlined service.
After-sales service – the service delivered after the initial sale of a product – is the best way for manufacturers to positively influence both revenue and profits, as well as customer loyalty. But, two particular functions, service parts management and pricing, are the main areas where manufacturers can truly optimize the service supply chain and meet (or exceed!) business objectives.
So, why should manufacturers care? And why is the combination of these two areas so important?
Service Parts Inventory
Inventory management throughout the supply chain has always been a pain point for manufacturers. For service parts inventory specifically, the expansion of SKUs, the rise in e-commerce and heightened expectations for delivery time have made after-sales service more stressful and complex. But, using the right technologies can help manufacturers ease that burden.
The good news is that a cloud-based service parts management solution can help companies increase both margins and revenue from after-sales businesses. It easily integrates into an existing ERP system, and allows manufacturers to track parts, eliminate excess and obsolete parts and forecast when new parts are needed.
These practices are super important for not only meeting customer delivery expectations, but maintaining an edge over both direct competitors and third-party e-commerce sites. Beyond keeping products in the right place at the right time, inventory management technology reduces carrying costs – which are estimated at a mind-boggling 25% of the value of inventory that’s on the shelf.
Service Parts Pricing
While many execs are keenly aware that pricing is a powerful revenue and profit lever, they often overlook the profit opportunities linked to optimizing the prices of their service parts inventories – inventories that can be measured in tens or hundreds of millions of dollars!
Pricing approaches of the past are one of the biggest things holding back the full optimization of after-sales service. When it comes to traditional service parts pricing, simple cost-plus formulas and Excel spreadsheets are still the norm. But, these outdated methods often cause modern manufacturers to miss out on substantial revenue potential.
When coming up with pricing – especially in today’s “always-on” economy – manufacturers should be mindful of the different levers that can be used to enhance sales, including shopping data, region and demand. For example, after adopting a dynamic pricing structure in 2013, Amazon saw a 27% sales increase. The company has been pushing the boundaries of dynamic pricing ever since.
In other words, if third party e-commerce vendors are pursuing dynamic pricing to such an aggressive degree, manufacturers get in line to stay relevant in after-sales service.
The measure of any good pricing program is maintaining a strong customer base, and not losing any customers to the competition. Combine that with inventory demand, ensuring fill rates are increasing, dealers are healthy and warehouses are working efficiently, and you’re headed for success in today’s evolving marketplace.
At Syncron, this is what we help manufacturers do – measure both pricing and demand from a single platform. We’re completely focused on empowering the world’s leading manufacturers to deliver exceptional after-sales service experiences, and with an organization founded on the idea that after-sales service acts as a significant source of competitive differentiation, revenue, profits and customer loyalty, our combination of our cloud-based service parts management and pricing solutions allows our customers to do just that.