4 Challenges in Service Parts Management and How to Fix Them
Do you ever feel like you have all the right ingredients for a stellar Service Parts Management (SPM) operation, but you can’t get them to cook quite right? Or maybe you had the right ingredients, but some of them went bad and the flavor of the week changed before you could serve it.
Most SPM leaders know what it takes to execute a solid parts plan, yet it falls short even if they have fully stocked distribution centers (DCs). That’s because this industry must work in constant flux, grapple with unexpected variables, ensure everything’s connected, and keep sight of the big picture and the minutiae. Service Supply Chain (SSC) leaders’ biggest challenges include:
- Poor visibility
- Integration issues
- Obsolete inventory
- Parts variety
This article will dive into the nature of these challenges and how to overcome them.
Challenge #1: Poor Visibility
Many SSC leaders struggle to keep tabs on what spare parts are available across their networks. This could mean they do not have an efficient way to track which parts are taking up space in their DCs, or that they lack visibility of their vendors’ supply banks. Given that most SSC companies work with clients and partners across a sprawling geographic area, both scenarios are likely without the right tools.
So, how can you get a bird’s eye view of all the parts living across your network? It starts by leveraging critical data and then turning this data into knowledge. But before you can tell a meaningful story with your data, you need to collect the right plot points. Ask yourself:
What data do you want to share between parties? To parse through the huge amount of information that’s available to you, determine what you actually need to know and who needs to know it. Vendor A might sell a litany of parts you’ll never need to buy, so there’s no reason to keep tabs on all of them. Furthermore, some of your planners may only need to know about a third of the parts you accumulated from Vendor A, given their geographic location or customer jurisdiction. Zeroing in on which pieces of information really need to come to light can help clarify the narrative for everyone involved.
Do you have strategic partnerships (third party)? In addition to face-value data about parts availability, some of your partnerships might warrant the exchange of more illustrative information, such as demand history for the parts at hand. This more in-depth exchange of knowledge can help drive both parties’ business initiatives forward.
How do you decide what to track and why it’s important? It might sound like a simple task to decide which pieces of data make sense to collect, but this requires some strategic thought. Based on the nature of your business and your goals, as well as your customers’ and partners’ goals (and requirements), determine which parts of the story are worth your time to track.
“Worth your time” takes on a whole new meaning for data collection if you try to do it manually. Not only do traditional methods take more time than you probably have, but they also lack the cohesion and prowess to ensure your data tells an impactful story that reaches the right people, right when they need it. Automation can help streamline the storytelling process and drive value by turning your data points into actionable tasks for your team.
An automated workflow with well-defined parameters will help you collect the data you need every time and will promptly alert the most appropriate parties when critical information surfaces.
Challenge #2: Poor Integration
As we mentioned earlier, many SSC leaders struggle to “bring it all together,” losing value in translation. Think about all the various functions and parties you must integrate customer data points across time, numerous partners, different tech tools, and siloed arms of your business – from operations to workforce management.
The best plans only come to fruition if all necessary parties know how to get involved, so communication across teams is key. To achieve true collaboration, teams require common goals, visions, and expectations, even if their daily objectives differ.
Optimizing communication between team players who may not usually intermingle improves customer satisfaction and reduces downtime. Here’s a simple, but common, scenario to illustrate this point: Your stocking location needs 99 parts to meet service level agreements (SLAs), but your company only budgets for 95 because they failed to get on the same page. The outcome? A last-minute rush to acquire material, likely incurring unnecessary next flight out or other shipping costs – or you have an unhappy customer.
This last scenario forces you to shift your focus from achieving daily tasks (and doing what you do best) to explaining to the customer why there’s a delay, which reflects poorly on your team’s organizational integrity and may cause downstream delays for other customers. That’s why it pays to spend some extra time upfront to reinforce communication lines across silos.
Source: Report: 2024 Service Leader’s Agenda Summary Findings | Service Council
To improve cross-functional collaboration, you must first identify your weak communication links. Is there a silo that exists between certain business functions, whether that’s people, parts, processes, or data? What about where triage and diagnosis efforts fail to connect? If so, you may not be following the most direct path to success.
Once you’ve identified all of your operational disconnects, ask yourself why they exist and have not been solved yet. You may unearth some simple fixes, or you may uncover structurally weak workflows that require improvement for other reasons as well. Even if miscommunication between teams never results in an unhappy customer, it still might degrade the cost and time efficiency of parts management.
Challenge #3: Increased Inventory of Obsolete Parts
As an SSC leader, you know the importance of minimizing obsolete parts. They represent a wasted investment, take up valuable distribution center space, and eventually require you to fund responsible disposal practices. So, let’s consider the two buying phases where companies are most likely to over purchase: New Product Introductions (NPI) and Last Time Buys (LTB). Companies typically carry 40% too much inventory because of poor NPI and LTB decisions.
Buyers get tripped up during NPIs because of all the unknown that comes with feeding a new product to the market. Often, SSC leaders lack the necessary demand and performance data to understand how their customers’ new products will fare upfront, making it easy to overinvest in spare parts.
At Baxter, we’ve seen situations where people bought more during the NPI phase than they ended up needing for the entire life of the product. This happens when companies try to use traditional methods for tracking demand data, or even a ‘gut feeling,’ to predict NPI outcomes – they simply will not cut it. More predictively robust tools like AI are necessary to navigate uncharted territory.
When it comes to LTB decisions, companies also struggle to zero in on their true need for material because demand for legacy products will no longer follow a regular cadence. LTB decisions require accurate long-term forecasts, often spanning several years. The longer the forecast period, the higher the uncertainty and risk. But unlike NPIs, LTB periods allot you the opportunity to work with existing material, since everything you need to support legacy products should already live out in the field.
So, the challenge lies in figuring out how to creatively use existing material far in advance of your LTB phase. How can you get better usage of your existing material over time to maintain momentum without having to overinvest at the last minute?
Both NPIs and LTBs require you to balance the risk of stockouts (aka unhappy customers) with accruing obsolete materials, and achieving this balance comes down to accurate demand planning. During these two critical phases, solid demand planning requires the use of AI and large data sets to accurately predict product installed base and spare parts demand far into the future.
Challenge #4: Supporting a Greater Variety of Necessary Parts
The more variables you throw into your SSC strategy, the trickier it gets to track everything. This applies to parts as well. When you work with a variety of customers who require service for numerous kinds of products, you must invest in a litany of different service parts. The more parts you work with, the more vendors, kinds of storage and transportation requirements, and expertise you must manage.
So, how do you optimize your visibility of parts availability across the SSC for a textured constellation of materials? Again, it comes back to leveraging critical data and automation to streamline processes and drive value. The strategies we shared for improving visibility, integration, and parts management become even more important when you’re dealing with a diverse inventory.
When you introduce a new part based on customer requirements, there should be an automated protocol in place to integrate it seamlessly into your network. This requires end-to-end visibility of your existing and incoming inventory, as well as powerful communication across teams and partners to ensure every part follows the most efficient path from vendor to distribution center to technician to customer.
Ready to discuss how Baxter Planning can help you orchestrate a smoother service operation? Let’s chat!
