• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • Login
  • Subscribe
  • Logout
  • My Profile

  • CORONAVIRUS
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • REGIONS
    • Asia Pacific
    • Canada
    • China
    • Europe
    • Latin America
    • Middle East/Africa
    • North America
  • THINK TANK
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » Blogs » Think Tank » How Service-Parts Makers Are Coping With Recession

Think Tank
Think Tank RSS FeedRSS

How Service-Parts Makers Are Coping With Recession

September 3, 2009
Robert J. Bowman, SupplyChainBrain

How has the recession affected the service-parts end of manufacturing? Depends on whom you ask. Software vendor MCA Solutions (http://www.mcasolutions.com), a specialist in that area, recently canvassed its customer base on the topic and got a variety of answers - including some disagreement over when economic recovery is due to kick in.

The survey, conducted earlier this year, reached out to virtually all of MCA's accounts, targeting both senior executives and operations personnel. High-tech and semiconductor manufacturers reported the most dramatic impact from the downturn. Their new-product sales were down so sharply that service parts were accounting for more than half their total revenues. In normal times, that share would be less than 20 percent, says MCA chief executive officer Bob Salvucci. With a drop in the demand for microchips, the sale of new machines was down by 50 to 80 percent, depending on the individual company surveyed. (Keep in mind that service parts traditionally account for a hefty portion of the revenues of big manufacturers such as Boeing and Lockheed, as well as automakers.)

Less of a change was seen by makers of medical equipment, although customers are hanging on their machines for a longer period of time, Salvucci says. A unit that might have been replaced in three or four years is now staying in service for four or five.

In the aerospace industry, spare-parts consumption was down due to a big drop in flying hours. That trend, of course, leads to less wear and tear on capital equipment, hence less of a need for parts. So manufacturers in that sector, unlike those in high-tech, saw their spare-parts revenues decline.

One way or another, just about all of MCA's customers are experiencing dramatic impacts from the slump. Semiconductor executives said the situation "is the worst they've seen it," says Salvucci. "That industry is typically an early indicator. They're forecasting an uptick in the third or fourth quarter."

Others weren't so optimistic. Based on feedback from their own customers, some survey respondents didn't expect any meaningful improvement in sales until 2010. Prospects for some automakers could be even bleaker, although Volkswagen saw first-quarter sales that were larger than those of Toyota. Salvucci credits the company's relative success to its early entry into China and other Asian countries, where demand for new automobiles remains strong.

Across the board, manufacturers are struggling to maintain service-level agreements (SLAs) with their customers while streamlining the service-parts supply chain as much as possible. They're analyzing where they can close depots and warehouses without impacting their customers. They're also examining how to cope with a rise in demand when business recovers.

When that finally happens, it won't be business as usual. Even now, Salvucci says, manufacturers' customers are making new demands for better service. The U.S. Department of Defense has instituted a formal process known as performance-based logistics. DOD is mandating the creation of strict SLAs between its own agencies, as well as with primary suppliers like Boeing. In turn, those suppliers are making new demands on their own vendors, asking for stronger commitments on performance and component reliability.

"We're seeing a lot more activity - more collaborative types of planning between OEM [original equipment manufacturers] and Tier 1 and 2 suppliers," says Salvucci. For those companies, a recession is no excuse to lie down on the job.

- Robert J. Bowman, SupplyChainBrain

Comment on This Article

RELATED CONTENT

RELATED VIDEOS

Wake up to Coronavirus Updates and the latest Supply Chain News!

Subscribe to our Daily Newsletter

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • Coronavirus-watch-Armada

    Virus Update: Biden’s 100 Million Doses ‘Doable’ in 100 Days; China to Donate 500,000 Doses to Philippines

    Coronavirus
  • U.S. and China Trade

    How China Won Trump’s Trade War and Got Americans to Foot the Bill

    Global Supply Chain Management
  • Obtaining Adequate Supplies of PPE in the Pandemic

    Watch: Obtaining Adequate Supplies of PPE in the Pandemic

    Coronavirus
  • AT&T

    How the Pandemic Has Altered AT&T’s Global Sourcing Strategy

    Coronavirus
  • U.S. Vaccine Shift Stirs New Unease as 128 Million Join Line

    U.S. Vaccine Shift Stirs New Unease as 128 Million Join Line

    Coronavirus

Digital Edition

Scb home issue 27

2020 Supply Chain Innovator of the Year

VIEW THE LATEST ISSUE

Case Studies

  • LSP Saves Customer $1.5 Million a Year With MPO Global Inbound Management

  • Auto Supplier Wows Key Client Using riskmethods Supply Chain Savvy

  • Integrating Shipping and Compliance Saves Conglomerate Millions

  • How a Consumer Goods Giant Upped Its On-Time Delivery Performance

  • LSP Wows Global Client, Quickly Advances to Become End-to-End Provider

Visit Our Sponsors

6 River Systems ArcBest Armada
aThingz BluJay Burris Logistics
DSC Logistics DCSA (Digital Container Shipping Association) DHL Resilience360
Genpact GEP Honeywell Intelligrated
Infor Logility Magnitude Software
MPO Old Dominion Oliver Wight
OpenSky Ports America Purolator
QAD Precision Red Classic Riskmethods
TGW Systems Transportation Insights Watson Land Company
Westfalia Technologies Workjam Yang Ming
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright © 2016 - 2018 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing