Another key difference with service planning is that you often have service contracts that commit you to getting things back up and running when a part does fail. If you have a part that’s going to fail once per year, you can choose to stock one or zero of that at the respective location. Measurement is simply different for Service Parts forecasting; you don’t want to focus on turns for service inventory, but you do need to keep an eye on your fill rate.
Mike and John each could go on and on about individual attributes and why they are different for finished goods versus service, including things like:
- The number of stocking locations.
- The types of stocking locations you have.
- How your inventory flows through each network and stocking locations.
- How part chaining and item relationships are different.
This article only scratches the surface, so you’ll have to listen to the recording to hear a more in-depth answer to this question.
Evaluating Your Organization’s Network
The second question Mike and John addressed was about networks and how to start selling more high-availability contracts: “Where should we start evaluating our network?”
Service Parts organizations have service contracts where a company has sold a product to their customer with a commitment to get that equipment back up and running the same day, if it breaks. Because of that, you need to have access to parts within an appropriate geographic distance. Before anyone goes on site, technicians must figure out what parts they need. And then they need to worry about how to acquire them. Either someone drives to pick up parts from the warehouse, or they get delivered.
Most organizations don’t rent warehouse space in every city across the world where they need parts to support their customers. They go to a third-party logistics (3PL) provider –companies like UPS or Flash Logistics. Those companies provide multi-tenant warehouse space to customers. Their space is secure and has the equipment, racking, and everything you need. This way you don’t have to rent warehouse space and hire people to monitor it.
Contracting with a 3PL provider gives you flexible space where it’s needed, as those providers already have warehouse spaces in almost every large city across the world.
This flexibility is essential, as many Service Parts organizations have products with short lifecycles, they face a lot of competition, or they may be a newer company navigating the unknowns of rapid growth. Even when you use a 3PL, you still need to monitor and adjust your network on a periodic basis. The frequency level of monitoring should be based on how frequently your installed base, the products you’re selling at a particular service level agreement, changes geographically.
Essentially, if you want to start selling more, you need to have high-availability contracts. If you contract with a 3PL provider, there’s going to be some level of integration with your Enterprise Resource Planning (ERP) and Field Service Management (FSM) solutions to mediate inventory and transactions with them. You should build this integration to take advantage of the network’s flexibility. Make sure your IT organization doesn’t implement a solution that’s hardwired to the network as you originally bought it, so you can easily adjust that network without having to go through heavy-duty change cycles. If you want to close a warehouse in Fargo and open one in Des Moines, you should only have to worry about a configuration change that requires minimal or no IT support. That way you can really take advantage of the network flexibility you’re buying into with a 3PL provider.
Submit Your Own Question!
On that note, this concludes our summary of the first episode of Spare Talk. Have a question you’d like Mike and John to answer in a future episode? Send us an email at firstname.lastname@example.org!