Speed is increasingly a key supply-chain differentiator, but nowhere is that more true than in the business of supplying critical parts. In this sector, customers expect delivery within hours, not days.
Two primary forces are driving development of this service niche. First and foremost, original equipment manufacturers have warranty contracts with their end users and must be able to meet those contractual obligations, which frequently include protections against downtime losses. In an increasingly litigious society, companies risk severe financial consequences - both from lawsuits and damage to reputation - for failing to live up to their promises.
Another driver stems from the fragmented nature of many parts supply operations as companies generally have multiple service territories and often select different service providers for each. Faced with pressures to reduce inventory levels and associated investments, OEMs and other companies need greater visibility not only to parts availability but also to pipeline contents - a difficult challenge when responsibilities are spread across numerous networks.
"OEMs are always looking to improve their service to their end users, and having a service parts network with a high parts availability and rapid response time to their field engineers enables them to improve system uptime," says Scott Collins, vice president of service parts logistics for Sonic Air, a division of United Parcel Service. Keeping contract warranty terms and other service commitments also protects hardware investments and minimizes business disruptions from hardware failures.
Throughout the last decade Sonic Air, in conjunction with UPS, has focused on designing a service network to specifically meet the needs of these OEMs. "We give the OEMs a single point of contact, we use our own network, and we have systems connectivity across that entire network," Collins says.
|"Having a service parts network with a high parts availability and rapid response time to their field engineers enables [OEMs] to improve system uptime."|
-Scott Collins of Sonic Air
|"Our hotel customers can be assured that orders from field service technicians will be processed and delivered using the most advanced and cost-efficient system currently available."|
-Allan Goodson of On Command
|Sonic Leverages Parts Expertise With New Service Offerings|
While the emphasis is on getting critical parts to the customer, this market also has a reverse logistics component that deals with returning damaged or unusable parts. When market research revealed the need for a service in this area, Sonic Air developed a program to help customers consolidate the reverse flow of damaged or unusable parts and shrink the amount of inventory in the reverse pipeline. This offering, developed in conjunction with UPS's authorized return service, is centered at Sonic's Louisville distribution center.
"When CEs [certified engineers] perform repairs at a customer site, they generally end up with parts that either are defective or otherwise inoperable, and often these parts are highly valuable," says Scott Collins, vice president of service parts logistics for Sonic Air. Rather than the CE spending time arranging the repair or disposal of the faulty parts, they can attach an authorized return label to the part and give it directly to a UPS road vehicle, or drop it at any of the UPS service centers or authorized shipping outlets. Another option is to leave the part at any of the 1.7 million corporate accounts where UPS makes regular stops. "This enables the CE to get the part on its way the same day and into the pipeline for refurbishment," says Collins. The customers pre-determine specific parameters for deciding which parts are repaired and which are disposed, and Sonic follows the established repair and disposal instructions.
One of the advantages to this arrangement, Collins adds, is that often an engineer, who hasn't had the opportunity to actually diagnose the specific problem, will bring an array of replacement parts to the customer site. The return service allows the CE to get those unused replacement parts back into available stock the next day, which helps reduce the amount of safety stock needed at the DC or stocking location, thereby improving inventory turn time and carrying costs.
Sonic also operates a smart courier service that involves non-technical repair/replacement services on-site for customers, performing swap-outs of monitors, keyboards, and certain peripherals, for example.
The smart courier personnel are Sonic employees, Collins adds. "The customer tells us what they want us to do and provides us with the processes they want us to follow, and we then train our couriers on a customer-specific basis to perform these tasks."
Another projected growth area involves inventory finances. "We have started to offer inventory financing services to certain clients where we finance and own the inventory until it is delivered to the customer," adds Collins. "This enables the customer to remove the assets from their books and support that inventory with a reduction of working capital." The financing is provided through UPS Capital Corp.
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