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Logistics and Parts Just Can't Go Their Separate Ways

Analyst Insight: The top strategic action tied to improving parts management for service and support organizations in a recent Aberdeen research study on service parts logistics was to integrate service parts planning, forecasting and execution with overall logistics functions (i.e., procurement, supply chain management, inventory management) to ensure the delivery of the right part to the end customer when an asset goes down or is not operating at full efficiency. - Aly Pinder Jr., senior research associate, Aberdeen Group

Organizations can no longer view their service and support operations (i.e., logistics, parts management) as disparate silos. In a 2011 survey of more than 200 spare parts and logistics executives, nearly 70 percent of all respondents stated that they view parts management and logistics as linked. These two aspects of the organization have a direct impact on the customer experience in a number ways, further highlighting the importance of efficiently managing spare parts delivery. Customers feel most of the same challenges as the OEM or service provider in this current economy (i.e., shrinking margins) and can ill afford to have non-performing equipment. As customers face uncertainty, the top pressure facing service organizations in regard to improving parts management continues to be a push for better and more efficient service (56 percent of respondents). Not only are organizations facing external pressures for this need to deliver better service, they are also finding that inventory management and visibility into the entire lifecycle of parts is becoming more of a challenge (41 percent and 36 percent of respondents, respectively). With all of these issues coming to a head, organizations must begin to focus on and excel in a few areas:

-Integrate parts management and logistics under Service oversight. Best-in-class organizations (the top 20 percent of performers) have begun to re-evaluate the relationship between parts management and logistics execution. Fifty-five percent of top performers have integrated procurement, logistics and parts forecasting under Service oversight to provide the support teams with the added visibility and control into the delivery of these valuable parts to the customer.

-Analyze customer and product service parts data to aid in forecasting. With the breadth of stakeholders that consume information, it is integral that the organization captures and uses parts data to empower the service organization. With fluctuations in service demand, service organizations find customer and product data invaluable when forecasting future requirements for spare parts. Over half of top-performing organizations (55 percent) analyze parts data to ensure that they can manage their service operations to meet and exceed their customer's needs.

-Link performance with incentives. Top-performing organizations have aligned incentive recognition with the behaviors needed to provide the customer service experience required. Organizations that provide incentives for field technicians and regional service depots to return / transfer parts for repair in a timely manner have an average of 5 percent returned parts accounted for in comparison to 8 percent for those who do not. Losing sight of even one part in the service chain can have a negative impact on the service organization from a planning perspective which ,in turn will negatively affect the end customer as they wait for a part to be delivered to get their asset back up and running.

                                                     The Outlook

These findings above come from Aberdeen's Service Part Logistics 2011 report. In it, fully 50 percent of respondents said it was paramount to integrate service parts planning, forecasting and execution with overall logistics functions. Going forward, successful companies - those that can supply the needed part on time - will have to deliver on that resolution first.

Keywords: Service Parts Management, Third-Party Logistics, Logistics, Aberdeen Group, Parts Management, Inventory Management, Service Parts Data, Aberdeen's Service Part Logistics 2011 Report

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