Best Practices In Service Parts Logistics

Navigating The Complexity Of Spare Parts Management

This article first appeared in the December 5, 2018 edition of Future of Field Service

 

Service Parts Logistics Management represents the largest investment and second largest operating expense within an Aftermarket Service or Field Service Organization (FSO). Service parts also represents one of the most critical resources required for ensuring high first-time fix rates and recurring revenue. Therefore, anything that a FSO can do to improve the productivity, efficiency, or quality of the service parts logistics pipeline will have a dramatic positive impact of financial performance and customer satisfaction.

To understand where and how to improve service parts management, let’s first examine critical operational issues that impact financial performance of the service parts function. Our research indicates that 60 to 75 percent of all service requests require spare parts to resolve the issues.  As a result, an FSO is likely to experience low inventory fill rates and/or low first-time fix rates if they do not have adequate systems or procedures in place to ensure parts availability where and when needed.

Another issue is that nearly 50 percent of the value of an FSO’s parts inventory can be found below manned parts depots or warehouses (i.e., vans/trunks, branch offices, or consigned to the customer site). The problem is that many FSOs don’t know exactly where this inventory is located or what the dollar value is at each location. Without this understanding, FSOs run the risk of having too much inventory in manned warehouses to compensate for their lack of information.

Before you click away, disappointed that I brought up something as practical and boring as time management, hear me out. My intent is not to crush your spirits.

One reason why spare parts are often located below manned warehouses is because the FSO has not implemented the appropriate controls to track these parts. Another is because the parts have not been returned through the FSO’s reverse logistics and/or depot repair operations when it is deemed defective or no longer required. Approximately 80 percent of the value of spare parts in the logistics pipeline fall into this category. However, it is also important to consider that 30 to 35 percent of parts returned to depot repair operations are actually good parts. The reason they are returned, if at all, is because either the FSO’s FSE misdiagnosed the problem or used the spare part as a test procedure. In other words, replacing a spare part in a problem unit to determine if the problem is indeed due to a defective spare part.      

Navigating The Complexity Of Spare Parts Management

As a result of these issues, spare parts management becomes a complex task. Having too many spare parts on hand can have a negative impact on the balance sheet and income statement; too few parts can result in degradation of service quality and customer satisfaction. Fortunately, there are several best practices that FSOs can implement to avoid these challenges. These include: 

  • Track and control spare parts: FSOs can utilize bar codes, RFID, and blockchain to track and control the volume and value of spare parts in all stocking locations whether manned or unmanned.
  • Leverage IT Infrastructure: Utilizing enterprise management systems and best of breed software solutions to manage, plan, forecast, and coordinate spare parts inventory can have a dramatic positive impact on improving first-time fix rates and inventory availability levels.
  • Expedite delivery to reduce logistics investment: By moving toward same-day or next-day parts delivery and storing spare parts in Forward Stocking Locations (FSL) that serve multiple FSEs or customer sites, an FSO can significantly lower their investment in spare parts.
  • Improve front-end diagnostics: Implementing remote support and IoT solutions to identify the problem, symptom, and root cause of a problem prior to dispatch will increase the probability that the FSE has the right part on hand and that he/she does not utilize spare parts as a form of test equipment.
  • Advance Depot Repair Operations: Transforming depot repair activities from a job shop to assembly line function, implementing test and screening procedures pre- and post-repair, and performing these functions in FSLs and Regional Return Centers will improve spare parts velocity (i.e., cycle) time and reduce inventory stocking level requirements.

Benchmark research by Blumberg Advisory indicates that significant improvements in efficiency and productivity can be achieved by implementing the strategies identified above. The average percentage improvement by key performance indicator is as follows:

By implementing these best practices, FSOs will also find they operate a stronger balance sheet, healthier profit margins, and higher levels of customer satisfaction. These strategies all have several things in common, namely a heavy reliance on data, technology (i.e., information systems), and process improvements. 

Companies that operate asset-intensive field service operations, in other words those that maintain a high investment in spare parts, should give serious consideration to implementing the strategies identified above.

This requires that FSOs examine how well their internal logistics management systems align with the state of the art, as well as assess the impact these systems have on KPIs related to Service Parts Management. In other words, conduct a benchmark evaluation of these systems, process, and KPIs against industry standards and best in class performance.

To learn more about Service Parts benchmarks and best practices check out Blumberg Advisory Group’s Operational Excellence consulting practice at https://blumberg-advisor.com/operational-excellence/

The Service Imperative

5 Reasons Why High Tech Companies Must Adopt A Service Oriented Culture

For several decades, economists have observed that Service businesses are playing an important role in fueling the economy.  In fact,  Services as a percentage of the US GDP has grown dramatically.  As of 2015, the service sector employed approximately 90% of US workers and accounted for 78.9% of  the US Gross Domestic Product (GDP).

Nowhere is the service trend stronger than in the High Tech Industry.   Most people outside of this industry do not think of services when they think of manufacturing and distribution of high tech products. However, companies engaged in these activities are generating a significant portion of their total revenues from the provision of service and support of high technology equipment and systems.

In general, consumers require a broad array services and support on the products they purchase to ensure these products work effectively.   For example, design & engineering, installation, integration, technical support,  and break fix services.   Consumers are also increasingly interested in purchasing value-added services such a predictive maintenance, analytics, and optimization which extend the life of the product, minimize downtime and disruption to their operations, and ensure better outcomes or yields for their business.

As a result of these requirements, High Tech companies have found that services can generate 10 to 20 times more value (i.e., revenue) over the life-cycle of the product than the actual purchase of the product itself.   This is compelling reason why many companies have developed  services offering and adopted a services mind-set.  Other reasons include:

  • Contribution to Corporate Revenue Profits: Services can account for as much as 30% to 40% of revenue and contribute upwards of 50% of more to the bottom line among best in class OEMs and Resellers.  As such, some companies remain profitable simply because of the financial contribution from their service business.
  • Customer Requirements: Increasingly customers require a broad array of service and support on the equipment they purchase.  Furthermore, customers expect and are willing to pay for additional support.   In some markets, a company’s service offering can represent a competitive advantage and in others, its table stakes.
  • Recurring Revenue Stream: Service & support provides companies with access to a recurring revenue stream for as long as their customers own and operate the equipment.  This also enables companies to establish subscription based revenue offerings through the provision of service contracts.
  • Sustainable Business Model : Product service businesses offer protection against economic downturns. Customers still need services to keep their equipment up and running during a recession.  More importantly, services can generate a profitable revenue stream independent of the sale of products.   Some companies, particularly those with very mature product lines, often turn to services as a strategy for subsidizing their core product business.  Others, having realized that service can be more profitable then products, have exited their product businesses entirely, in favor of building and growing their service business.
  • Builds loyalty and customer satisfaction: The provision of a broad portfolio of basic and value added services offers a way for companies  to build brand loyalty and customer satisfaction. Indeed, service business ensure this outcome by providing ongoing support to the customer and through their commitment to optimizing the customer experience.

Increasingly, product manufacturers are recognizing the strategic role and value of service to their business.  As a result,  they expanding their service force to include “Anything as a Service” (XaaS) business  models.  These business models have not built overnight.   They are often the last step of  a business transformation journey known as the “Servitization”.    The first step is making the commitment to managing services as a profit center.  Therefore, it is strategic imperative that companies adopt a services mindset and provide service offerings if they are going to survive in the future.

“Servitization”; A B2B Business Model That Will Be Embraced by the Machine Community in the Coming Decades

This blog post was written by Ron Giuntini, president of Giunitini & Company, a consulting firm focused primarily on the Configuration and Pricing of Quotes [CPQ] engaged in B2B Aftermarket agreements. Ron is also the founder of G35 Software, a prototype proprietary CPQ software tool.

Before venturing further, let us first define ”servitization”; it is a business model in which a machine (i.e. forklift, truck, order picking robot) is not sold, but is accessed by an end-user through a multi-year fixed-fee outcome-based service-contract. A servitization focused contract is primarily landed at the time of the delivery of a new or used machine. The service typically encompasses the following 15 elements:

  1. The equivalent of an operating lease is supplied; machine ownership is never transferred to the service recipient. Many of these machines in the future will be autonomous.
  2. The Intellectual Property [IP] of a machine’s embedded software configuration is not controlled by the service recipient, but by the owner of the machine.
  3. Solutions are supplied to maintain (i.e. break/fix) and improve (i.e. upgrade) a machine’s capability (i.e. lift 5,000 pounds), employability (i.e. 95% uptime in a 24 hour period) and deliverability (i.e. 8 hours of operation per day).
  4. An outcome-based fixed-fee is typically aligned with the customer’s revenue streams; in fact the fee becomes a variable cost. For example a public warehouse forklift user could be charged a fee of $3.75/ton for movements from storage to staging and loading of a vehicle; the fee would be directly aligned with their handling charge of $4.50/ton for the same movements to its customers.
  5. Solutions are delivered for a continuous period of time during the post-production life cycle of a machine; when over 1 year, revenue recognition financial reporting is required.
  6. The performance levels of solutions delivered are assured. For example technicians will arrive on-site for a break/fix event within 2 hours of being notified within any 24/7 period.
  7. Amendments are incorporated to the contract, such as up-selling or cross-selling; will often occur as a result of changes in the business environment of the customer during the multi-year contract duration.
  8. Contract renewal is aggressively pursued; it is a major end-game of the business model.
  9. A supplemental fee schedule is established; for solutions delivered that are not supported in the contract.
  10. Guidance for the price and configuration for quotes of the pre-landed contract is overseen by one entity.
  11. Higher profitability for seller; typically 25-150% higher than that of a product.
  12. “Stickiness” of buyer-seller relationships; continuous contact for years.
  13. Higher sales commissions for account managers; multi-year worth of booked sales.
  14. Optimized budgeting for buyer; converts CapEx to OpEx and reduces # of transactions.
  15. One “button to push” by buyer to address any performance issue with seller.

Currently, the decade-plus employment of the term of “servitization” has primarily been the focus of European Union [EU] based academia and EU OEM Board Of Directors [BOD] suites. In the last 2-3 years, EU-based OEMs have been touting the term in their US-based operations. Also a limited group of US-based academics and management consultants have been discussing the model as well. As of today, few US-based BOD, or investors are familiar with the term, but it is my belief that will be changing in the near term. Note that the terminology employed for the US-based business model may be different than that of the EU-based “servitization”; currently US-based firms employ terms such as “subscription” and “Product-as-a-Service [PaaS]” that encompass many of the elements of “servitization”.

In one perspective, the revenues generated from servitization simply shifts transactional-based revenues to that of the contract. For example, a Preventive Maintenance [PM] task is scheduled every 600 hours employing $1,000 of parts; this will be done either by the maintainer/owner purchasing $1,000 of parts in a transaction or having the parts bundled in the contract’s pricing of the fixed-fee per hour of operation. At this point there is little incentive for the seller to embrace servitization; it appears to be a zero-sum game.

The “magic sauce” of the seller of a servitization offering encompasses 4 major areas.

  1. Higher Profitability
    There is a powerful incentive to reduce costs incurred to deliver an outcome-based fixed-fee solution during the life of the contract
  2. Contracted Recurring Revenues
    The investor community is “excited” about such a recurring revenue business model; they reward the enterprise with highly favorable valuations that can exceed the Price/Earnings [P/E] ratios of their peers by 25%-50%.
  3. “Stickiness” of Relationships
    Engaged in a long-term relationship with buyer, providing opportunities for future renewal and up-selling/cross-selling revenue opportunities.
  4. Optimized Performance of Machine Models; Customer Success
    In order to meet outcome performance assurances, the seller will provide the buyer with continuous improvements in the capabilities, employability and deliverability of the machine.

Below are some of the factors that may hinder the embracement of servitization by the Commercial Machine community.

  1. The difficulty in changing organizational cultures of actors.
  2. The potential risks of large multi-year losses for seller.
  3. Challenges of sellers in educating the investor community of the new business model on the income statement and balance sheet.

In conclusion, it is not if the “servitization” business model will be embraced by the Commercial Machine community, but when. It will be difficult journey, of 10-25 years, but when early adapters demonstrate the financial and relationship benefits, the rest of the community will follow suit.

Would you like to learn how to effectively implement a “Servitization” business model in your company?  Schedule a FREE Consultation TODAY!

References on Service and Support

Suggestions have been made for me to recommend books on the topic of service and support. Of course there are many written on the subject; however, most of these books tend to be focused on consumer related industries such as hospitality, restaurants, and personal care services which focuses primarily on either services marketing or customer service, not both.  Furthermore, some do not provide a holistic perspective on how to build, operate, or grow a profitable services business.  

Unfortunately, there are only a handful that deal with service in product related or high-tech manufacturing business.  The two books that come to my mind are Managing Service as  A Strategic Profit Center and Managing High Tech Service Using a CRM Strategy.   Both of these books were written by my late father, Donald F. Blumberg.  Although these were published in 1991 by McGraw Hill and 2003 by CRC Press respectively, the  content is still quite valuable and relevant to today’s high-tech service and support organizations. To those reading this blog, you are probably interested in learning more about recent publications.

Given my interest and experience in all things service related, I began to research and identify books published in the last 3-5 years on the topic of service and support.  What interested me most were those that provided a holistic or strategic perspective on service management as opposed to those that focused solely on one aspect, like customer service.  On top of this interest was to also find publications distributed by the commercial book trade which helped me to learn those publishers who are willing to invest in authors writing on the topic of service and support.   While my research was not exhaustive by any stretch of the imagination, I was surprised to learn there are not many books published on this subject by the commercial trade. My view is that they are clearly missing a large and growing market opportunity.

A description of a few books that match my search criteria are found below:

Made to Serve: How Manufacturers can Compete Through Servitization and Product Service Systems

By Timothy Baines and Howard Lightfoot

Publisher – John Wiley Sons, Apr 9, 2013 – Business & Economics – 272 pages

Made to Serve provides readers with a framework for determining the feasibility of adopting a services-led competitive strategy, along with strategies for designing and implementing the kinds of service offerings customers expect when they purchase technology.

Designing & Managing Industrial Product Service Systems

By Petri Helo, Angappa Gunasekaran and Anna Rymaszewska

Publisher – Springer International Publications, Aug 27, 2016 – Business & Economics – 101 pages

This book analyzes how companies can manage the transition from products to services. Examines the role of marketing and operations strategy, and how actual service delivery takes place. It also considers the pricing decisions that need to be made when moving from a product focused model to a service oriented model.

Profiting from Services and Solutions: What Product-Centric Firms Need to Know

By Valarie A. Zeithaml and Stephen W. Brown Business

Publisher – Expert Press, Aug 15, 2014 – Business & Economics – 132 pages

This book is written for executives in companies that manufacture or sell products.  The authors provide a framework for how a manufacturing company can transition from selling products to services and solutions. 

I do hope you can find the time to read these books and perhaps provide us with your feedback.  If you are interested, we’d be happy to publish a 500 -850 word book review from this blog site.  Also, please feel free to recommend any other books you think your peers in service and support might be interested in reading. 

Question: Reading Recommendations? Comments? Thank you! You can leave a comment by clicking here.

When Being Big Enough Isn’t Enough: The Case for Using Econometric Models in Service Market Planning

Assessing market demand is critical for making optimal decisions with respect to investment and resource allocation.

As Field Service Organizations (FSOs) strive to build and grow profitable businesses, they must develop and implement strategies based on valid and reliable market research.   Assessing market demand is critical for making optimal decisions with respect to investment and resource allocation.  For example, it might be important to know the size and growth rate of a market segment prior to building a marketing strategy, establishing a division, or developing a service offering for it.  If the market segment is large and growing rapidly then a more aggressive investment may be warranted. Taking a more conservative approach could lead to a miscalculated decision that results in a significant loss or failure for the company.

While obtaining a granular level of data on the size and growth rate of a market segment can help service executives make better decisions and ensure better results, it is surprising that many do not attempt to obtain this level of insight.  Instead, service executives often rely on gut instinct or settle on an order of magnitude, given some related indicator.  For example, we often hear service executives claim that the service market must be big because the sales of the product are so high.  In other words, its “big enough” to warrant an investment.    

The problem with this type of market analysis is that it assumes that 100% of people who have bought a product will also purchase the service. It also does not take account the size of the installed base, competitive issues, or other constraints or factors influencing demand such at technology trends, economic trends, or market trends.  More importantly,  it does not provide any hard data into the size of the market or its growth rate. 

While surveys and secondary research have merit when it comes to market sizing and forecast, they too have their shortcomings.  Surveys and secondary research can of course provide insight into size and growth of a market as well as answer questions with respect to who buys, what do they buy, and factors influencing supply and demand.  However, they do not actually measure the actual size and growth of the Total Available Market (TAM) for the service under consideration.  In addition, a shortcoming of secondary research that we hear often is that it is not specific enough or tailored in its the perspective. Questions about the research methodology may also arise when the source is an industry analyst. 

Ultimately, a good TAM analysis is one that takes into account the size and growth rate of the installed base as well as the serviceable value of the installed base along with its anticipated growth rate.  We have found econometric market models to be very effective methods for conducting this type of service market analysis.  A good econometric model considers several data points related to buyers and products including but not limited to the number and types of buying organizations, equipment penetration rates (i.e., shipments), population density, and replacement rates.  These factors help in determining the size and value of the installed base while surveys and secondary research provides data points (e.g., price points, average spend, etc.) necessary for determining current and projected revenues and/or expenditures for a given service.     

Building an econometric model to determine the size and forecast of the TAM for services may seem like a lot of work. However, the efforts are worth it and can prevent a company from making serious mistakes and/or miscalculations about their market opportunity.  Several years ago, a client of mine gave a presentation at an industry conference where his competitors were present.  The presentation showed that his service business was growing twice as fast as the market. Although he had commissioned our firm to build a TAM model, he chose to compare his company’s revenue growth to market size data from an industry analyst’s report (i.e., secondary research). This analyst provide a market size estimate and forecast that was more conservative than ours. After the presentation, I asked my client why he didn’t present our data.  “We based our investment and resource allocation decisions on your model not the secondary research. We want to keep this fact a secret from our competitors as long as we can” was his reply.  Had his company relied only on secondary data they would have had different results.   His answer provided that his investment in building the market model was well worth it.   

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The Secret to Selling More Service Contracts

This article first appeared in Field Service News on May 28, 2018

Field service executives often face challenges when it comes to generating additional service revenue for their companies.

They often face resistance from customers as evidenced by low contract attachment rates. The natural tendency is to blame the price as the reasons why customers aren’t purchasing more services contracts.

After all, this is the feedback they received from their sales teams and from the customers.

Being logical and rational business people, field service executives try to solve the problem by lowering the price, after all, if the customer says that the price is too high, it must be the reason why they are not buying, right?

To quote, the popular song by George and Ira Gershwin, “It ain’t necessarily so!”. While price may be a factor in the purchase decision, seldom is price the only reason why customers don’t purchase service contracts.

In market research studies that I have conducted for clients in a wide array of technology service markets, I have found that price is often low on the list of criteria that end-users consider when selecting and evaluating service providers. Criteria such as quality of service, knowledge and skill of service personnel, breadth of service offering, and vendor’s knowledge of their business are perceived by customers to have higher importance than price alone.

The truth is “your price is too high” will always be an objection that customers provide when they cannot justify the value of a service contract.

This is because they have no way of logically defending the value of the service being purchased. Stated another way; they are not able to differentiate the benefits of service contracts from time and materials service. The problem is that Field Service Organizations (FSOs) often attempt to sell service contracts without providing justification about why a service contract is better than simply paying for service on a time and materials basis.

A common saying among sales professionals is that customers buy emotionally and then defend their purchases logically. All too often, FSOs provide little emotional reason why a customer should purchase as service contract as opposed to T & M and even less logical supporting evidence about why a service contract is more valuable.

To achieve high attachment rates, FSOs must be able to articulate the value of their service offerings to customers as well as to their own salespeople. The value proposition must impact customers’ emotionally by addressing their fears, worries, doubts, and concerns about the impact of service or the lack thereof on their operations.

For example, fear of excessive equipment downtime, lost revenue, low machine utilization levels, or the possibility of quality defects. Of course, the FSO needs to provide logical supporting evidence why their service offering will eliminate these issues.

FSOs achieve this results by articulating, either through a sales conversation or marketing collateral, what’s included in a service contract that is not included in time & materials. This requires they do an effective job in defining the coverage, entitlements and resources available to the customer through a service contract.

They must be able to answer the customer primary question “What’s in it for me?”. If the only difference between a service contract and time & materials is that the customer can prepay for service, then there is no emotional value or logical contrast. However, if the service contract provides a preferred level of service (e.g., 4-hour response time, 99.9% uptime guarantee, 7 by 24-hour coverage, parts, etc.) or preferred price structure then the customer is presented with some real value and contrast.

Ultimately, FSOs must be able to help customers defend their purchase of service contracts. They do this by offering more value in a service contract than the customer could possibly receive through time and materials services.

Fundamentally, FSOs can deliver better service to customers under contract.

This is because the contacts provide data about the installed base and service demand requirements. As a result, FSOS can anticipate service events and be more effective at planning and allocating service resources. This, in turn, makes it possible for FSOs to provide a guaranteed level of service to their customers.

Honesty is always the best policy especially when it is supported by a guarantee and exceptional service!

Do you have any comments or questions?  Let us know by posting below !!

The Role of Data in the Servitization Journey

Data is becoming more important as we consider one of the most significant trends impacting the technology industry, "Servitization".

Several years ago, Blumberg Advisory Group worked with a company that provided hardware maintenance on film based photo labs found in big box retail outlets. Their service revenues and profits were declining because digital photography was replacing the need for film based photo labs. Although the client offered a new digital based technology to replace film based photo-labs, these systems were not being installed at the same rate as the older systems were being phased out.   Digital systems didn’t require as much service and support. They were less complex and easier to maintain than their film-based cousins.

Our client required a new strategy to offset their declining revenues and profits.  They needed a solution urgently or the parent company would shut down this division.  If we did not know the importance of data or the concept of managing the capability to serve, we would have probably recommended that the client lay off some of its field service workforce to reduce costs and improve profits.  This could have led to a downward spiral of layoffs, company morale and growth.

So what steps did we take?  We analyzed their data.  We reviewed their field engineer utilization rates, customer response times, field engineer skill levels, and the equipment on customers’ premises.  In conclusion, we found that their field engineers were not being completely utilized.  We found out that these engineers had further knowledge and expertise in supporting other types of equipment found on the customer site.  They were typically able to respond to a customer request within four hours even though the guarantee was for eight.  

Based on our analysis, we recommended that they expand their service footprint to other types of equipment located on the customers’ premises, i.e. electronic cash registers and point of sale equipment.  We also recommended that they charge a premium price to customers who required faster (e.g., 4 hour) response time.  As a result, this client went from losing 20% of their profits per year to a 50% increase in new business within 24 months of implementing our recommendations.

Ultimately, the key to our client’s success lied within the data.  Data is becoming more important as we consider one of the most significant trends impacting the Technology Industry, “Servitization”.  This trend describes the transformation that many companies are undertaking as they move from primarily selling products to generating a sizable portion of revenue and profits from services.   Ultimately, the path toward Servitization leads companies toward offering anything as a service (XaaS).  In other words, their business has reached the stage of development where they are no longer selling products or solutions to their customers, but outcomes.   For example, instead of selling a copier machine they are selling their customer the right to use the machine to produce a certain number of copies over a specific period or time.

To deliver on this promise, the provider must not only have great people, process, and technology but access to data related in terms of machine condition and performance (e.g., alerts and notifications), parts availability, field engineer location and skill sets, diagnostics, etc.  With this data in hand, the provider can ensure resources are available when needed and that the customer receives the outcome it purchased.  The data is made available through technologies like the Internet of Things, Artificial Intelligence, Virtual Reality, etc.   Examples of companies that are along the servitization journey are Rolls Royce, ABB, Siemens, Kone, and General Electric. They have generated profitable income and know that a truly exceptional service business is built on four foundations – people, process, technology, and data.

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Field Service Scheduling Software and What You Need to Know

Scheduling software has long been a foundational technology for field service companies allowing them to meet customer demands.

This article initially appeared in Field Service News – September 7, 2018

 

Michael Blumberg, President of the Blumberg Advisory Group lifts the lid on all of the key aspects of this crucial tool…

If you have spent any time in Field Service, you probably understand the importance of managing service delivery functions against key performance indicators (KPIs). Among the most critical KPIs in the Field Service Leaders track are First Time Fix (FTF), Service Level Agreement (SLA) Compliance or Onsite Response Time (ORT), and Mean Time to Repair (MTTR). These KPIs measure the effectiveness of a Field Service Organization (FSOs) in delivering quality service in a timely manner.

The inability to meet KPI targets may result in exponential costs, customer attrition and loss of revenue; whereas the ability to exceed customer expectations can result in customer appreciation followed by an increase in profit margins and sales. To effectively schedule/dispatch the right technician to arrive on time with the right parts and skillset plays a significant role in meeting these outcomes. This is definitely not a small feat for your typical FSO.

Scheduling and dispatching Field Service Engineers (FSE) poses a challenge for most FSOs, particularly those with more than 5 FSEs. The reason behind this is there are many variables and factors involved.

An FSO with only one or two FSEs and a few customers may not perceive scheduling to be a major challenge. The volume of service requests may be relatively low while the options of who, when and where to send them may be rather limited. Scheduling becomes more of a challenge as the volume of service requests (i.e., customers) and the number of FSEs increases.

Adding to this complexity are the business objectives and/or constraints an FSO must optimize to meet its scheduling requirements.

With additional constraints or objectives, the more difficult it becomes to produce a solid schedule. For example, if the objective is to only meet a response time commitment to the customer, then the decision is easy – assign the FSE who can arrive in a timely manner at the customer’s site.

If FTF, MTTR, and/or SLA Compliance targets are also part of the equation, it becomes even more difficult to produce that solid schedule. Adding a profit margin objective, high call volumes, multiple geographies, and a sizable pool of FSEs, the decision becomes even more overwhelming.

The reason why scheduling is so excruciating of a task is that there are numerous factors that an FSO would need to create and evaluate to determine the optimal assignment for each FSE.

This is a time-consuming activity that requires an extensive amount of computational power to achieve. Many companies have suffered from a loss of time and resources in dealing with confusion and potential human error. The solution is Dynamic Scheduling Software.

Dynamic Scheduling Software provides FSOs with the feature-rich functionality that streamlines, automates, and optimizes scheduling decisions.

This technology ensures the FSO sends the assigned technician to the right job having the proper skill set and arriving on time. These applications typically leverage a scheduling engine that optimizes FSE job assignment. Scheduling engines vary in their complexity ranging from those based on business rules to Linear Programming (i.e. goodness of fit) techniques, Operations Research Algorithms (e.g., Quantum Annealing, Genetic Algorithms, etc.), or Artificial Intelligence (AI)/Self-Learning applications.

The complexity of the scheduling problem, number and types of resources involved, duration of tasks, and objectives to be optimized play a role in determining which scheduling engine is most functional.

Critical factors to consider may include whether the scheduling engine can handle:

  • Multi-day projects or short duration field service visits,
  • People and assets (e.g., tools, parts, trucks, equipment) or solely people,
  • The number and types of KPIs that are part of the objective, and
  • Route planning requirements.

In evaluating Dynamic Scheduling Software, FSOs are also advised to consider the following criteria:

  • Cloud versus On-Premise Deployment Options
  • Speed and Ease of Implementation
  • Integration with Back-office Systems
  • Availability of Real-time Visibility by the Customer
  • FSO Requirements for Best of Breed or Integrated Enterprise Solution
  • Total Cost of Ownership
  • Return on Investment
  • Vendor Industry Knowledge and Experience

There are over a dozen software vendors who offer some form of dynamic scheduling functionality for field service.

Obviously, no two Dynamic Scheduling applications are alike. Each one has their points of differentiation. The best solution is a function of the level of importance the FSO places on each criterion and how each vendor meets these criteria.

Regardless of which vendor is selected, the benefits of Dynamic Scheduling are clear.

In fact, industry benchmarks show that companies who implement these types of solutions can achieve a 20% to 25% improvement in operating efficiency, field service productivity, and utilization. The impact on bottom line profitability and customer satisfaction is substantial. To enable FSOs to provide customers with an Uber-like experience and significant profitability, FSOs should consider deploying Dynamic Scheduling Software as part of their service delivery infrastructure.

Is Now The Right Time To Replace Your Field Service Management Software?

 This article first appeared in August 20, 2018 online issue of Field Technologies Online 

The market for field service management (FSM) software market is large and growing. In 2017, the market for cloud- based applications was valued at $1.2 billion by Blumberg Advisory Group, and we anticipate that the market will experience a five-year compound annual growth of 22.8 percent. In other words, it will more than double by 2022.  

Given the size and growth of this market, it is no wonder that dozens of software vendors are vying for share. Each vendor claims that their software will help field service organizations (FSOs) transform operations, keep up with industry trends, adhere to best practices, increase profits, and maximize customer satisfaction.

These claims are prompting many field service leaders to evaluate if now might be the right time to replace their existing FSM solution.  Being rational business managers, field service leaders need logical reasons to upgrade or replace their software. Of course, there are many reasons but some are good and some are not so very good. With more than three decades of experience with this topic, let me share with you five good reasons why NOW might be the right time to make a change:

  1. Your current system is costly to operate and maintain. Lets’ face it, if you are spending too much to operate and maintain your existing system, then it is probably time to replace it. Typically, companies that operate antiquated, disjointed, and/or fragmented systems experience higher IT operating expenses than those who do not. I worked with one client whose IT operating expense were 12 percent of revenue (while best in class is 4 percent). The cost savings alone was enough to justify the purchase of a new system.  
     
  2. Your existing FSM software is hindering growth. Depending on its feature functionality, your FSM software can either facilitate or limit your company’s growth. A few years ago, I helped a client expand into a new service business. Unfortunately, their existing systems did not have the required functionality to manage the transactions and workflow of this new business. As a result, my client had to postpone the launch of the new business until they could replace their system.
     
  3. You can’t get good data from your current software. This is one of the most frequently cited reasons for replacing software. If you can’t obtain good data on your installed base, equipment service histories, field service engineer skill sets, cost of service, failure rates, etc., then your company is at a disadvantage because it lacks the business intelligence to effectively plan and manage resources. 
     
  4. Your current solution is impacting KPIs. Ultimately, the success of your FSO’s ability to meet financial targets and keep customers happy depends on its ability to manage service processes against KPIs. For example, first-time fix, SLA/response time compliance, MTTR (mean time to repair), etc. If your company’s performance trails significantly from industry average or best in class, then it is possible your FSM is to blame. Perhaps its time to consider replacing your current system with one that does a better job and drives performance gains?
     
  5. Your current solution lacks flexibility and scalability. It is important that your FSM software can scale up or down without a massive investment in capital or labor. In addition, it should offer flexibility in terms of how workers can share and access data as well as flexibility or openness in terms of the ability to add on third party applications.     

There will always be software vendors who offer new and innovative applications to the field service market. The desire to keep up with industry trends and best practices will also drive purchasing decisions. Implementing a new solution can be costly and time consuming, even if the ROI exists. Therefore, the decision to switch should not be made lightly. You can use these five reasons to provide an objective framework for decision making.  

Avoiding the Four Biggest Mistakes FSOs make when using Contingent Labour

This article first appeared in the June 18, 2018 online issue of Field Service News.

Michael Blumberg, President of Blumberg Advisory Group  and founder of FieldServiceInsights.com discusses  some of the most crucial mistakes field service companies can make when utilising contingent or seasonal labour…

Field Service Organizations (FSOs) in North America, UK, and Europe are increasingly turning toward crowdsourcing platforms and subcontractors to augment their field workforce.

This type of outsourcing strategy enables FSOs to become more agile in meeting customer demands for service. As a result, they [FSOs] are able to reduce costs and improve service productivity. In addition, crowdsourcing and contingent labour helps solve the problem of finding skilled labour on a rapid basis.

However, turning to subcontractors and crowdsourcing platforms does involve relinquishing some level of control over the labour force. Naturally, questions emerge about the reliability, expertise, and quality of technicians that are sourced through these options.

Over the last two years, we have spoken with dozens of companies who have or currently utilize contingent labour to either augment their existing workforce or gain greater agility and efficiency over the entire field service delivery process. The majority are satisfied with their external providers and report positive results on key performance metrics such as First Time Fix and SLA Compliance/Onsite Arrive Time.   On the other hand, a few anomalies exist where the performance of contingent labour did not meet the FSOs expectations.

Quite often, FSOs who experience subpar performance make critical mistakes when retaining and managing contingent labour.

Here is our perspective on the biggest mistakes they need to avoid:

1. Failure to fully vet individual technicians doing the work

Don’t assume that every contract technician (e.g., subcontractor, freelance, crowdsource) you dispatch has the skills, training, and experience necessary to complete the work properly and in a timely manner. Insist on viewing background checks, certifications, and credentials of every contract technician assigned to your company.

2. Failure to train and onboard technicians

Quite often companies issue work orders without to contract technicians without training or guiding them on how they’d like the work to be performed.

For example, they do not explain how they’d like the tech to greet the customer and/or notify the customer when the work is complete.  Fortunately, Internet-based learning systems make it possible for companies to train and onboard contractors in a cost-effective and rapid manner.

3. Failure to communicate with contractors

This is the biggest mistake that a company can make is hand off work orders as if they were tossing a hot potato over a fence.

This will result in problem with respect to key service performance metrics such as SLA compliance, First Time Fix, and No Fault Found.  It is important that companies provide contractors with detailed and specific instructions about the activities they need to perform on each assignment.

At the same time, contractors also need to communicate with the companies that hire them on the status of calls, issues or problems they are experiencing, and results of their actions.

4. Failure to integrate contract or crowdsourced technicians into their service delivery process

Problems can occur when there is too much of an arm’s less relationship between the company and the contractor.  In other words, there is little accountability, visibility, and control between the company and contractors/technicians, and vice versa.

The key to success lies in treating contractors as an extension of your company.  Companies can achieve this outcome by leveraging communication technology, collaboration tools, and workforce automation software.  Relying on these systems will ensure the company achieves best in class service performance through its contractor network.

In summary, FSOs experience challenges to crowdsourcing when they underestimate the level of due diligence, systems, and processes they need to put in place when utilizing this type of labour. This does not necessarily mean that they must make huge capital investments.

Rather, they are urged to design and implement processes and procedures by leveraging existing infrastructure when they can.

Devoting the time and effort to this initiative will pay off. Our research suggests that FSOs who have an unpleasant experience with contingent labour do so because they rush into the decision without much thought, planning, and preparation.

Basically, they are looking to solve an immediate problem with no consideration to future. In other words, they are taking a tactical approach to labour shortages where a strategic solution is required.