Executive Briefings

Service Parts Management: Delivering Value in a Topsy-Turvy Market

Analyst Insight: This software market, like most, took a hit in 2009, but we still like its long-term growth potential. We continue to see companies adopting service parts management software successfully, saving millions of dollars in inventory costs.

By the time the numbers are all in for 2009, we expect the service parts management software market to have decreased by 6 percent to 8 percent. This actually isn't half as bad as it might sound. Nearly every software market in supply chain management suffered, but service parts management seemed to weather the storm better than most. We continue to see quantifiable benefits delivered through the use of service parts management software.

Within service parts management, we see a couple of trends. The first is the integration of the functionality more closely with order management. As companies integrate planning with execution more closely, we're seeing an increasing number of inquiries around order management systems that integrate with service parts planning (SPP). Typically, SPP software passes the stocking recommendations to a different system to take care of ordering any parts that might not be in stock or are understocked. Usually that other system is ERP, but we're seeing interest in order management provided by service applications and commerce applications.

The second trend we're seeing is the incorporation of service parts management into performance-based logistics. Companies in A&D, automotive, high-tech, medical device, and other verticals are being asked to support performance-based contracts, where instead of just selling a product, they're also selling the use or uptime of said product. This is a new experience for many companies, so they're turning to the technology vendors in service parts management to help plan on how to stock inventory profitably and still be able to deliver on their contracts.

The Outlook

Service parts management will continue to thrive, but perhaps not in its current form. Based on the nature of the inquiries we receive and the development plans of the vendors, we suspect that overall the functionality will become more incorporated into larger supply chain management, service management, or ERP suites. Either way, it will continue to do well, and we expect the market to pick up in 2010.

By the time the numbers are all in for 2009, we expect the service parts management software market to have decreased by 6 percent to 8 percent. This actually isn't half as bad as it might sound. Nearly every software market in supply chain management suffered, but service parts management seemed to weather the storm better than most. We continue to see quantifiable benefits delivered through the use of service parts management software.

Within service parts management, we see a couple of trends. The first is the integration of the functionality more closely with order management. As companies integrate planning with execution more closely, we're seeing an increasing number of inquiries around order management systems that integrate with service parts planning (SPP). Typically, SPP software passes the stocking recommendations to a different system to take care of ordering any parts that might not be in stock or are understocked. Usually that other system is ERP, but we're seeing interest in order management provided by service applications and commerce applications.

The second trend we're seeing is the incorporation of service parts management into performance-based logistics. Companies in A&D, automotive, high-tech, medical device, and other verticals are being asked to support performance-based contracts, where instead of just selling a product, they're also selling the use or uptime of said product. This is a new experience for many companies, so they're turning to the technology vendors in service parts management to help plan on how to stock inventory profitably and still be able to deliver on their contracts.

The Outlook

Service parts management will continue to thrive, but perhaps not in its current form. Based on the nature of the inquiries we receive and the development plans of the vendors, we suspect that overall the functionality will become more incorporated into larger supply chain management, service management, or ERP suites. Either way, it will continue to do well, and we expect the market to pick up in 2010.