Spare Part Supply Chains in an Era of Servitization

Spare parts are a forgotten component of supply chains.  However, with the rise of service-based businesses and the concept of servitization—the spare parts supply chain has become a critical path to success for many companies.

Supply chains are scrambling to keep up.  Customer influence, buying habits and buying power have changed dramatically.  By pairing current and emerging technologies with a focus on servitization, organizations can meet customer demands. Although spare parts and post-sales support, for example, are difficult to manage, there are other parts of the supply chain that are necessary to operate in a  nimble manner.

Investment in Capability – Supply Chain Technology, Data and Operations

Significant supply chain technologies are already populating the marketplace. These software systems can provide companies the functionality and flexibility to continuously adapt their processes and supply chains to meet the ever-changing demand for spare parts support.  A modern suite of planning systems—WMS, OMS, TMS, etc. will ensure that key supply chain capabilities are in place as the stress of spare 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 the 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.

Next Generation and the Power of Prediction

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 amassed huge swathes of valuable data that they are still unable to harness.  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 spare part supply chain is centered on erratic customer need, but there are patterns which can be utilized so that some needs can be predicted before they arise.  The incorporation of the 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 greater opportunities for service and spare part supply chains.

Value can be delivered in the short term, in spite of the structural limitations that companies must understand and address (before reaping the benefits from new technologies).  SKU or specific failure rates and purchasing data trends that show insight into SKU, part, location and customer profile correlations—enable companies to get ahead of the demand and adjust service, stocking and purchasing strategies. This results in higher customer satisfaction and retention, decreased inventory costs and reduced technician hours per service visit, among other benefits.

The future of the supply chain is being driven by a need to integrate operations, data and technology – as nimble supply chains are required to meet the servitization demands of the modern consumer.  This is particularly true for spare parts and after-market operations where new servitization business models and increasingly complex products will continue to increase the need to respond to volatile demand and spare part spikes.  Adoption of integrated technology and advanced analytics will be required by any modern supply chain hoping to get ahead of – and succeed in – this challenging environment.

 

Co-authored by Alex Cheesman, Supply Chain Management team, Infosys Consulting