Is your Services business contributing
to your bottom line?

Are you a manufacturer that also maintains a service function? Are you a service function operating inside a manufacturing firm? If so, then the following information may prove useful for you:

• “The most profitable service businesses, the top 25%, are 75% more profitable than the average business unit.”
• “On average, 46% of total profits of companies benchmarked are due to the service and parts businesses.”
  Deloitte Research – The Service Revolution in Global Manufacturing Industries

In the study, “67% of those surveyed, had service business growth slower or at the same rate as their overall businesses.” If service is so critical than why is it the average company doesn’t focus more time, resources and innovation in service of their existing customers? After all, it was Tony Alessandra that said, “being on par in terms of price and quality only gets you in the game. Service wins the game.”

Nearly 40% of executives surveyed said continuous optimization of the overall supply chain design of the service business is of the highest importance over the next three years. Yet, only 1 in 10 companies (11%) were found to have high performance in this area.

The survey found median forecast accuracy for parts planning was “80% with 25% having a median of lower than 52%.” Can you imagine the extra costs that must be incurred to meet customer expectations with this level of performance? Can you imagine a state where 20% or more of the time the part your customer needs is located somewhere other than where needed? The cumulative costs of expediting, transportation fees, engineer utilization, and customer down-time, all add to a waste stream that decrement the contribution margin at a staggering rate.

Is your business operating at these levels of performance? Are you losing sleep trying to find the solutions necessary to affect this area of your company? Are parts availability, planning system accuracy and visibility, supplier performance, and long part lead-times, affecting your ability to deliver a compelling service proposition?

If so, then consider partnering with those who have the knowledge, experience and capabilities to move you up the ladder of performance. Do yourself and your customers a service and reach out to the service parts management experts at ASIL. Our consulting practices and industry leading Max Partnering® tool suite contain solutions targeted toward this critical area of service excellence.

Contributed by Warren White