Spare parts are an often-overlooked component of supply chains.

However, with the rise of service-based business models and the concept of servitization, the spare/service parts supply chain is a more critical path to success for companies. Pairing current and emerging technologies with servitization focus can enable an organization to meet customers’ demands — not just for service parts but for all supply chain elements needing to operate in a similar, nimble manner.

Investment in Capability 

There is significant supply chain technology already populating the marketplace. These software systems can provide companies the functionality and flexibility to continuously adapt their processes and supply chain to meet ever-changing demand for service parts support and servitization complexity. A modern suite of planning systems, WMS, OMS, TMS, etc., will ensure that key supply chain capabilities are in place as the stress of service parts and one-off customer requirements continue to increase in scale and importance.

Not only will such integrated systems enable new levels of visibility across an enterprise, they will lessen response times to customer requests. By leveraging the cross-functional data from these systems, companies can better understand trends around customers and their needs. Synchronizing these supply chain systems, associated data and processes into fully functional, integrated operations is becoming a “must have” in supply chains.

The Power of Prediction

Even companies that have integrated technology, data and processes are only scratching the surface of what is possible. In today’s digital age, many organizations have incredibly valuable data that they are still unable to capitalize on. Enter big data — vast amounts of unstructured, cross-functional data that represent a majority of an organization’s internal and external transactions. This transactional data can be utilized for proactive work, instead of reactive chaos. The service parts supply chain is centered on erratic customer need, but there are patterns that can be utilized so that some needs can be predicted before they arise. The incorporation of internet of things (IoT) sensors magnifies the value of this data — especially within prediction of failure rates and product service needs. These trends, alongside product and customer segmentation, present great opportunity for service and spare parts supply chains.

Of course, there are structural limitations that a company must understand and address before being ready to realize benefits from such new technologies. However, value can be delivered in the short term. SKU or specific failure rates and purchasing data/trends that show insight into SKU/part, location, failure rate and customer profile correlations can enable companies to get ahead of the demand and adjust service/stocking/purchasing strategies. This will result in higher customer satisfaction, higher customer retention, decreased inventory costs, and reduced technician hours per service visit, among other benefits. 

This will also enable companies to support new operating models, based on servitization, that will offer increased revenue, customer satisfaction and competitive positioning.

The Outlook

The future of supply chains requires integrated operations, data and technology — as complex, nimble supply chains will be necessary to meet the servitization demands of the modern consumer. This is particularly true for service parts and aftermarket operations where new servitization business models will continue to increase in importance. Adoption of integrated technology and advanced analytics will be required by any future supply chain hoping to succeed in this challenging environment.

Andy Prinz is an associate partner, and Alex Cheesman is a consultant for supply chain management at InfoSys Consulting.