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/

Protecting Your Brand in the Secondary Channel

A True Case Study

This week’s blog is a guest post by Fizah Jadhavji, CEO of Vivitech Solutions, Inc. — a major player in Reverse Logistics, closeout, excess and obsolete products marketplace.

Every major OEM brand selling to big box retailers such as Walmart, Target and Costco must accept customer returns- this is a challenge that all companies in today’s marketplace face. Poor return management practices can easily eat up your bottom line as well as damage a brand’s reputation. Many OEM’s are apprehensive about liquidating returned products due to fear of channel conflict, interference with sales of new products and dilution to the brand’s reputation.  In fact, top-tier branded products that are sold within online channels deeply discounted as “new open-box” often are the result of ineffective return procedures.

When these “at-risk” and returned inventory stocks that are liquidated for 10 cents on a dollar show up on Amazon and eBay, it opens the door for the end-user to claim warranty for a product that you already liquidated! Consequently, many OEMs are left in a position where they may issue return credit on the same item twice!

How do you efficiently manage the product return cycle if you are a major brand selling thousands of products and multiple categories across the USA? How can you best handle returns without having to spend more capital just trying to control your exposure in the market?

THE MILLION DOLLAR PROBLEM
This was the million-dollar question an OEM client of Vivitech Solutions was facing in managing their returns. At issue, the OEM was offering advance return allowance to retailers, which in-turn allows the retailer to charge back a certain percentage to the OEM on every invoice to cover returns. This initially seemed like an economically feasible solution because the OEM was able to cut costs. Retailers constantly need space and by receiving advance return allowance, they have the right to dispose of unwanted returns anywhere they choose. However, the OEM soon realized their product kept popping up everywhere at extremely low prices. They were constantly competing against themselves, and they were being double-dipped on the warranty side as well.

The OEM also noticed that some products being returned that had already come through their return center once, meaning that the OEM issued a refund or exchange twice for the same unit. Their legal team did some research and found that returned products were starting to show up online as “new open box” products with prices below market value. Thus, the OEM’s warranty center started receiving phone calls from customers who were misled into buying a used product as new. The OEM’s’s first reaction was to immediately stop the bleeding – so they stop offering advance allowance and asked all their customers to start shipping the product back to the OEM’s distribution center. The OEM would audit the RMA’s to ensure accuracy, and then destroy the units – allocating additional time, labor and financial resources to ensure that returned products were being properly reported and disposed of.  The OEM quickly realized that this process was not financially feasible, and was directly cutting into their profit margin. As pressure started building for our OEM client, top management realized they needed to find a creative solution.

THE MILLION DOLLAR SOLUTION
Vivitech Solutions solved the OEM’s problem by creating an end to end solution for managing returns. Vivitech was appointed the exclusive National Return Center and authorized repair center for the OEM.  All shipments from the retailers where sent directly to this location where they were audited.   In addition, Vivitech provided  a data-driven approach which allowed for  a triage analysis of the product, costs, and market prices to achieve the highest return by refurbishment and servicing. Vivitech also remarketed  these refurbished goods in secondary channels and smaller retailers. This helped to prevent channel conflict and protected the OEM’s primary product line.

THE MULTI-MILLION DOLLAR RESULT
This solution has been in place for  three years and the OEM is very pleased with the program’s performance. The OEM was once spending six figures annually just to handle the logistics of the return process, only to end up destroying these products in landfills afterwards. They have now off-loaded the headaches of handling returns themselves and  significantly reduced overhead costs in exchange for benefiting annually from a seven-figure secondary source of revenue.

Basically, Vivitech created a secondary market and constant revenue stream for their OEM partner. In fact, the OEM’s sales team & outside reps now offer and sell Vivitechs’ “factory-serviced” products to customers as second-chance discounted products.  This case study shows how by outsourcing the reverse logistic function, a process that was once depleting profit margins,can result in a higher profit margin, recurring  revenue, and higher ROI.  Truly a win-win for all parties involved.

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Service in the Sharing Economy

share

The sharing economy is on the rise as more and more consumers conduct business transactions through platforms like Airbnb to find lodging and Uber for transportation services. These companies have experienced explosive growth in the last couple of years and their financial value is skyrocketing among the investor community.  Indeed, Airbnb’s valuation is at $25.5Billion in their attempt raise an additional $1.5 Billion in funding and Uber’s valuation of $50B is higher than 80% of the S & P 500 companies.

A sharing economy platform is one that leverages information to empower individuals and organizations with information that enables distribution, sharing and reuse of excess capacity in goods and services.

Sharing economy platforms take many different forms, including:

  • Product-service systems – privately owned goods that are shared or rented out via peer to peer market places.
  • Redistribution markets – pre-owned good are passed on from someone who does not want them to someone who does.
  • Collaborative lifestyles – people with similar needs and interests banding together to share and exchange less-tangible assets such as time, space, skills, and money.

 

I also think of a sharing economy platform as having a number of basic elements. First, it uses technology to create a peer to peer marketplace.  Second, they are “open” meaning anyone can exchange goods and services with anyone else.  Third, goods and services are available on demand.  Fourth, payment in full is often made only after the service is delivered in many sharing economy platforms. Fifth, fixed costs are converted into variable expense through the sharing of resources.

The success of Airbnb and Uber has not only led to the emergence of competitors in the lodging and transportation market but also the creation of sharing economy platforms in other industries.  “Uberized” has become a commonly used buzz word in the business world by industry analysts and thought leaders.  This word is often juxtaposed within the question… Is our industry the next to be Uberized?

To a large extent, High Tech Service & Support is far along the path to becoming Uberized. For example, product – service systems like Rolls Royce’s “power by the hour” form that basis of the “Servitization” trend which is gaining appeal in the High Tech Industry.   In addition, redistribution markets have existed for decades within our industry; just think about all the businesses in the IT, Telecom, and Medical Electronics industries that trade used and refurbished equipment.  Collaborative lifestyle solutions are provided through companies like Field Nation, Work Market, and PC-SOS that enable individual field service engineers and small businesses to become a contingent workforce for larger companies.

However, in many ways the High-Tech Service & Support Industry is not truly “Uberized”.  For example, the platforms/solutions I’ve identified above are not truly peer to peer.  They typically involve an intermediary or aggregator that manages the redistribution of products and services. Equipment owners (i.e., end-users) are not leasing or renting unused capacity to other users.  Second, some of these models are not truly open.  There is often a thorough vetting process involved in becoming a member or user of these platforms and solutions.  On the other hand, the on-demand, pay for performance, and conversion of fixed cost to variable expense elements of the sharing economy do exist today within the High-Tech Service & Support Industry

Regardless of where you think our industry is on the sharing economy spectrum there is certainly room for new innovation.   Now it is your turn.  I’d love to get you answer to this question…. Is our industry (i.e., field service, reverse logistics) the next to be Uberized? Please cite examples and share your thoughts on why or why not the sharing economy can work in our industry.  You can also feel free to schedule a strategy session if you have a great idea you’d like to vet or discuss with me in more depth.

The Five Most Important Trends Impacting the ITAD Market

Recycle

In my last blog post, I provided a high level summary of key findings from the recent market research study we conducted for Arrow Electronics on the topic of IT Asset Disposition Trends.   Now that I’ve piqued your interest, I thought I’d share five important data points from the survey results:

  1. 9 out of 10 companies in 2014 have a formal end-of-life ITAD strategy
  2. Nearly 2 out of 3 companies surveyed choose to have a 3rd party service provider manage their end-of-life assets
  3. The most important factors in selecting a 3rd party service provider are adoption of compliance standards, well documented chain of custody, and high quality reporting
  4. 95% of companies feel that R2 and/or e-Stewards are the most important environmental standards related to ITAD
  5. Nearly 9 out of 10 companies feel that R2 and e-Stewards should be combined into a single standard

 

These findings validate the fact the ITAD has gained increased attention among not only IT Managers but C-suite executives as well.  However, these findings reveal that most companies do not view ITAD as a core competency.  Instead they choose to outsource it to 3rd Party Service providers.  This explains the increased level of competition within the ITAD market as more and more companies enter this space.  It is not just start-up specialized ITAD vendors that are pursing this opportunity but well established IT Service providers and distributors like Arrow Electronics who view ITAD as a natural extension of their product and service offerings.

Given the large playing field of competitors, end-customers are becoming increasingly selective about who they choose to conduct business with.  Among the most important factors are compliance standards, documented chain of custody, and IT reporting and analytics.  It is interesting that while R2 and e-Stewards are perceived as the most important environmental standards, an overwhelming majority of end-customers believe that they should be combined into one, single standard. This suggests that these standards are used interchangeably by end-customers.  Possessing one or both of these industry standards is simply not enough for an ITAD service provider to differentiate itself in the marketplace. While many companies can lay claim to a well-documented chain of custody and superior reporting capabilities, we believe that its additional industry standards such as RIOS, ADISA, NIST, and knowledge of best practices to minimize risk, reduce waste, and maximize recovery values that set one ITAD vendor apart from one another.  If you haven’t read the Arrow IT Asset Disposition Trends Report, we suggest you obtain a copy, click here.    To discuss the implications of this report on your company or business, feel free to schedule a free 30-minute strategy session with us today.

A Strategic Analysis of ITAD Trends

ITAD

The data is now in from our large scale market survey conducted on behalf of Arrow Electronics on the subject of IT Asset Disposition (ITAD) trends.  The results validate a popularly held view among IT industry practitioners that ITAD considerations continue to be a top concern for all size companies.   In fact, knowledge of ITAD best practices continues to evolve and improve among C-suite and IT Executives.  However, as one might expect the issues and concerns between the two groups vary somewhat.

Our research also indicates that all companies, regardless of size, are more likely today than in the past to budget for the ITAD process.  In addition, corporations are becoming more aware of penalties arising from improper disposal of IT assets, which has led to an increased implementation of formal ITAD strategies.  While the most important factors for creating an ITAD strategy have remained the same over the last few years (data security concerns, commitment to “Green” business practices, and mitigating legal and financial risks), companies are far less likely to apply their ITAD strategy outside of North America.  It is also clear that companies who have developed a formal end-of-life ITAD strategy are far more likely to have an ITAD provider handle their IT assets when compared with companies who do not have a formal ITAD strategy.

Companies using a 3rd party service provider to manage their end-of-life IT assets are currently very satisfied with their providers.  When choosing these providers, ISO industry certifications are particularly important, with R2 and e-Stewards being the most important environmental standards.  Due to their equal level of importance and credibility, most companies feel that R2 and e-Stewards should be combined into one standard.

While most companies have a data security policy regarding their end-of-life assets, data security concerns are still prevalent.  Data security concerns are particularly high among companies with a formal ITAD strategy as well as companies who use 3rd party service providers.  Most companies use multiple tactics to alleviate data security concerns, which includes using 3rd party service providers.  However, with nearly 2 out of 3 companies selecting a method such as “Delete the file directory on the hard drive” which does not fully eliminate the potential for data security breaches, there remains some uncertainty as to which methods are truly effective.

With most companies adopting a BYOD policy that allows employees to bring at least one device to work, there has been a dramatic increase in the implementation of policies to ensure that company data on BYOD devices is secure during active use.  The vast majority of companies are also implementing policies to ensure that company data on BYOD devices is eradicated once those devices are no longer active on the company network.

Corporate social responsibility/sustainability has also become increasingly important, with approximately 93% of companies expected to have a program in place by the end of 2015.  Companies who currently have a corporate social responsibility/sustainability program in place typically report their program’s progress in their annual report and/or other forms of corporate communication, both public and private.

The cloud is having a significant impact on the purchase of IT assets, with a majority of companies purchasing more assets to support the cloud.  Some of these additional assets purchased likely include tablets, whose use continues to increase.  As a result, ITAD practices and policies will continue a critical topic among C-suite executives and ITAD Managers.

Details of our survey results can be found in the Arrow IT Asset Disposition Trends Report. To obtain a copy, click here.

Key Performance Indicators and their impact on your business

kpi1

I gave a presentation a couple of years ago to a group of service managers and executives on the subject of key performance indicators (KPIs).  I was surprised by the fact that most of the audience could not give an accurate explanation of what a KPI is.  Most people thought it was a data point that was used to measure business performance.   However, this is not entirely accurate.

The true definition of a KPI is that it is a quantifiable measure of how successful an organization’s strategies are in meeting their goals.   To be effective, KPIs must be specific to your business needs, align with strategic goals, and bring overall benefit to your business.  Most importantly, it must inspire you to set new goals.

Unfortunately, many service managers confuse KPIs with industry performance benchmarks.  They are not the same thing.  In contrast to a KPI, a benchmark is a point of reference against which things may be compared or assessed. While a company might want to benchmark their KPIs against competitors in their industry, they shouldn’t assume that they must adopt the same KPIs as their competitors.  They might want to do this if their goal is to outperform competitors on every KPI they measure.  This may be neither practical nor feasible if their business needs and strategic goals differ from those of their competitors.

Let’s look at this from another perspective.  While there maybe dozens of different field service or reverse logistics activities that your company can measure, you’ll find that there are only a handful that ultimately drive the success of your company’s business strategy.  You’ll want to make these specific measurements your KPIs.   For example, your strategic goal may be to consistently meet your customers’ expectations for timely service.  There could be multiple factors to consider when measuring this outcome like response time, wait time, resolution time, call drive time, etc.  However, you may determine that SLA Compliance is the KPI that best measures your success or failure in meeting this strategic goal.  On the other hand, your strategic goal might be to deliver high quality service to your customers.  While this could be determined through factors like trunk stock fill rate or calls closed incomplete due to lack of parts, you determine that First Time Fix Rate is the best KPI measuring service quality.

When establishing KPIs, it is important that you answer these four questions:

  1. How will I know when my goals are reached?  This is a quantitative target that you want to establish for your KPI. It could be expressed as a raw number (i.e., 4 hour average response time), a progress measure (e.g. 98% SLA compliance), or incremental change (i.e., 10% improvement in Customer Satisfaction).
  2. What are the key success factors in reaching this goal?   A description of the core functions, activities, or business practices that must be performed in order to reach this goal.
  3. What critical actions do I want to take from the KPIs? It is important to anticipate how your company will react to the KPI measurement that it actually achieves. What steps do you take if you miss your target? What if you meet or exceed it? For example, hire more resources, retrain personnel, improve processes, implement new systems, etc.
  4. What results do I achieve through these actions?  Examine how these actions will impact your business.  In what timeframe will they impact your KPI and at what cost?  Are there other aspects of your business that will be impacted?

 

By answering these questions, you’ll have a strategic road map for achieving operational excellence in your business.  It’s all about getting clear about your goals, making sure you measure the right things, tracking results on a consistent basis, taking corrective action when needed and, of course, celebrating success. Do you want to learn more about how to achieve geometric results in your field service or reverse logistics business?  Schedule a free strategy session today.

5 New opportunities created by IoT and the challenges they present

new-jobs-internet-1

There has been some excitement in the media these days about the Internet of Things (IoT) and the promise it creates for businesses, consumers, and governments.  John Chambers, the CEO of Cisco, said on CNN’s GPS with Fareed Zakaria that IoT will create approximately $19 Trillion in economic value over the next 5 years.  As an example of the opportunities that are possible, Chambers points to the fact that the city of Barcelona created 40,000 new jobs through its connected city initiative.

While the upside potential is great, there are still many who believe that the disruptive force of IoT will have a negative impact on certain industries; eliminating jobs and destroying businesses instead of creating them. The proponents of IoT remind us that similar claims were made about the internet in its early days. However, according to a 2014 study by McKinsey and Company, 2.6 new jobs were created by the internet for every 1 job it eliminated. Will the same be true for IoT?

To answer this question, I think we have to look at how IoT will impact specific industries.  For example, let’s look at five (5) new opportunities that IoT creates for the High-Technology Service & Support Industry and the challenges they present.

  1. Facilitation of Remote Monitoring & Diagnostics: IoT makes it possible for manufacturers to implement remote monitoring and diagnostics solutions on a low cost and rapid basis. Of course, these solutions are as effective as the knowledge management tools behind them. Nevertheless, remote diagnostics can eliminate the number of emergency dispatches which in turn could have an impact on Field Service Engineer staffing levels. On the other hand, it is likely that new jobs will be created to monitor and analyze the data collected by these solutions as well as respond to the actions that are generated by this analysis.
  2. Greater integration with the supply chain: One the largest beneficiaries of IoT will be the service supply chain. By monitoring service related events, the service supply chain can have more visibility into the demand for spare parts and be more effective in planning and forecasting inventory stock levels. In addition, supply chain mangers can be more proactive in anticipating demands on forward stocking locations and depot repair & refurbishment centers. The net impact of IoT on the supply chain is an enhanced level of productivity and efficiency which is great for profits and job creation.
  3. Creation of barriers to entry: It is very possible that IoT will create new barriers to entry for service competitors. That is because once you control access to a device, you control the device itself. Manufacturers will need to think through how their channel partners participate in IoT solutions. Will channel partners participate in the revenue stream that comes from managing connected networks or will they simply resell the solution on behalf of the OEM? What options will be available when it comes to service & support? Will manufacturers implement open systems which make it possible for anyone to service the network or will be a closed solution keeping out competition?
  4. Collaboration between business partners: It is also likely that IoT solutions will be comprised of products and components from multiple suppliers. This will require greater collaboration between business partners. Manufacturers will need to establish new business protocols and rules of engagement when it comes to supporting IoT solutions involving third party products. This is likely to result in new job creation.
  5. Need for new business models:  IoT makes it possible for manufacturers to offer new added value services to their customers. At issue, these services are most likely to be monetized through subscription based models. New financial KPIs will be needed to manage these models. Instead of focusing on attach rates and gross margins, manufacturers will need to pay attention to monthly recurring revenue (MRR) and customer churn rates.   Revenue ramps up slowly under these scenarios and customer attrition rates are high so manufacturers will need to create marketing and onboarding programs to facilitate growth of MRR and reduce churn.

 

In summary, IoT will have a positive impact on the High Tech Service & Support Industry in terms of job creation and financial returns.  Indeed, IoT is likely to create multiple new jobs and businesses for everyone that it replaces.  While some companies and individuals may be at risk, they can mitigate the downside by taking a proactive approach to strategic planning.  Furthermore, companies who stand to benefit from IoT the most can ensure maximum returns, and thus double down on their investment, by incorporating fundamental strategic design principles into the development of IoT solutions.  To learn more, schedule a free consultation.

Strategic forces shaping the deployment of IoT & M2M

The Internet of Things

News about the Internet of Things (IoT) is everywhere. Indeed, IoT is one of the largest and fastest growing segments of the Information Technology industry.  The number of deployments of connected devices is forecasted to increase by 30% in 2015 from last year, according to The Gartner Group, with the total number of connected devices to reach 25 billion in 2020.

Those of us who have been involved with the High-Tech Service & Support Industry for some time will tell you that the concept of IoT and its cousin Machine to Machine (M2M) are nothing new. Remote Monitoring & Diagnostic tools have been around for decades.  As early as the mid-1980s, capital equipment manufacturers like Honeywell, Texas Instruments, and AT&T had deployed these solutions to improve the troubleshooting and maintenance of their systems.

At issue, it is only within the last couple of years that the number of IoT and M2M deployments has begun to sky-rocket.  Let’s look at some of the forces that are making this possible:

  • Social Forces: One of the reasons why I believe we are seeing a surge in connected devices within the High-Tech Service Industry is the recognition that data drives business. For service providers, it is no longer just about finding ways to reduce the time and cost associated with troubleshooting and maintenance. In order to optimize productivity and efficiency, and to facilitate innovation in a service business, you need data. While service executives have understood this for some time, end-customers now understand and appreciate that they also need access to this same data in order to optimize the operations and processes that comprise their enterprise. In essence, data about the condition of assets and machine performance is part of a larger system of systems which need to work in tandem to ensure that that the entire system works smoothly and efficiently.
  • Economic Forces: The cost of implementing IoT and M2M solutions has reduced significantly over the last decade. In the past, remote monitoring was achieved through dedicated land line data communications which were very costly to implement and maintain. Today communication is much more accessible and affordable through technologies like Internet Protocol, ZigBee, and Wireless. Furthermore, the cost of collecting data has improved significantly. Earlier solutions required expensive and clunky Programmable Logic Control (PLC) platforms. Now data collection is possible through low-cost, disposable sensors. Furthermore, the financial justification for IoT has improved. Not only is access to investment capital cheaper than ever but manufacturers are now finding ways to monetize IoT solutions resulting in a profitable revenue stream, higher ROI, and faster payback period. More importantly, the financial model associated with IoT deployments is changing. In the past, manufacturers would first attempt to sell individual customers on the benefit of adding remote monitoring to their capital equipment purchase. In turn, the customer needed to incorporate the cost of a Remote Monitoring solution into their capital expenditure and cash flow projections. The economics of IoT have now made it possible for service providers to make IoT solutions available as a subscription model, thus enabling end-customers to turn a high fixed cost investment into a variable expense.
  • Technology Forces: As noted above, the technology (e.g., data communications, sensors, etc.) associated with IoT and M2M is becoming cheaper, easier to implement, more secure, and flexible. In addition, we now have access to much more robust, cheaper, and flexible data repositories. Not only has the cost of storage improved but the advent of Big Data solutions enables us to leverage information collected by IoT in ways we have never known before.

 

For service executives who are dissatisfied with service being an afterthought in their organization, now is the time to look toward M2M and IoT as platforms for innovation and new sources of profitable revenue.    To achieve this outcome, service providers need to develop an overall service business strategy around IoT as opposed to merely a technology plan for connecting devices with back-end systems.   While addressing concerns with respect to security and risk are critical to any IoT deployment, the optimal strategy must incorporate a service centric philosophy, receive full endorsement by C-suite executives, and be formulated with active participation of the service leadership team.  Strategic design is critical to IoT success. For more information, schedule a free consultation.

A Baker’s Dozen: Getting an extra month out of your year

Baker's Dozen of Donuts

I’ve always been fascinated with the concept of a “baker’s dozen”. Buy twelve (12) donuts and get the thirteenth one free. A great concept! Did you know that this business policy was created thousands of years ago to prevent bakers from cheating their customers? It was a way for bakers to ensure that they never undercounted their customers’ orders by adding one more. Wouldn’t it be great if we could apply this same concept to other aspects of our business? For example, having one extra month in the year? Just think about what you could accomplish.

Why cheat yourself out of the best year ever? You can have a 13th month year and it starts this month. That’s right the way to having an extra month in 2015 is to use this December to plan for next year.  Sure, you are probably thinking that you’ll just wait until December 31st to write your New Year’s resolutions. And you’ve kept these resolutions every year? According a study from the University of Bristol, almost 90% of people who set New Year’s resolutions fail to achieve them. The reason is because their goals are too general and lack focus. More importantly, they lack a plan for achieving their goals.

What’s that? You’ve already developed an annual business plan. That’s great you are doing better than 80% of businesses. However, writing a business plan does not guarantee success. Unfortunately, too many plans become static documents that sit on a shelf and collect dust. To excel, you’ve got to take action. So let me give you a framework for creating a dynamic business plan, one that will get a jump start on 2015 and give you the extra month you need to meet and even exceed your goals.

In order to develop a good plan that leads to measurable results you must ask good questions; ones that are relevant and produce rigorous answers. Here are some examples of the questions that I like to ask:

  • What was great about the last year?  I think it is important that you start off any planning session by celebrating your successes over the past year.   This allows us to build upon our strengths and move to our next level of success.  The best part of this past year for me was creating new online courses on the subject of service marketing and disruptive technology. I’ve also established a couple of partnerships which other industry consultants that will allow us to better serve the Aftermarket Service and Reverse Logistics community. What about you? Did you develop any new service offerings, implement any new improvements, or win any new clients?
  • What do you still need to complete next year from the previous year? To make 2015 a success, I still have to leverage my accomplishments from 2014. This means that I must implement a consistent marketing program as well as institute an effective customer service policy to respond to issues that emerge from my new offerings. What are the things that you need to follow-up on? Maybe you’ve built a case for acquiring a new software system but now you’ve got to develop a well thought-out implementation plan with a manageable timeline and budget.
  • What are the game changes in your industry that you need to focus on? While still an emerging technology, industry analysts are predicting an upsurge in connected devices. That’s right, over the next 2 years we are expecting to see a 40% increase in the number of sensors that are connected to products. Not just fixed electronic devices but wearables! This will likely place new demands on the Service Supply Chain. One of my objectives for 2015 is to help industry participants anticipate these requirements and implement new profitable business models. I expect to accomplish this outcome through my new online course, Thriving Disruptive Tech.
  • What are the small things that you must do consistently? In Orson Wells’ great radio show, “The War of the Worlds”, tanks and guns could not destroy the aliens. They died because they could not survive earth’s environment. The lesson… not paying attention to the small things can kill you every time! Contract renewals and new service sales are two of those areas. Renewals maintain your base and new sales enable growth. Without the two, your business is facing possible death. That’s why we are continuing to help our clients with customer satisfaction measurement and improvement. I will also be launching a new online course in a few weeks, “Successful Service Marketing”, which will provide you with the knowledge, strategies, and tools to achieve exponential growth in your service revenues.

 

Once you have these answers you can start working on your plans for 2015. I recommend you start with writing out your year-end goals, followed by a list of your 9 month achievements, 6 month milestones, and 90 day action plan. Continue to update you action plan every 90 days. Work backwards to plan forward! The first 90 days are crucial in this industry and will set the stage for future results, so make sure they are aligned.

I recommend that you and all the members of your team follow this process on an individual and collective level, even if you already have a formal business plan. It’s easy to become complacent this time of the year. Stay sharp during the holidays and keep your winning edge intact for the new year. If you feel you are lacking resources or need some extra guidance; contact me today for a strategy session.

3D Printing and You

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You may be sick of hearing about technological “disruptions.” The coverage can sound like a paperboy selling ten-year-old headlines, and the forecasts can sound like shots in the dark. (Informed and accurate forecasts, of course, make no public sound at all.) It’s almost a Yogi Berra-ism that the real disruptions are the ones no one saw coming.

That said, you may want to make an exception for talk of 3D printing. It’s an old concept, but its disruptive potential is approaching a pivot point, and some high-performance models are poised to become standard household amenities. Whether 3D printing will really spark a new industrial revolution, reverse the tide of globalization, or pave the way for anarchy are open questions. That it will render many forms of manufacturing obsolete is barely in question. The real questions are “Which ones?” and “How should manufacturing, logistics, and service professionals adapt?”

Some might opt for denial. “Determined and clever individuals have been mass producing stuff for more than a century. 3D printing is just one extra tool.” Not exactly. With 3D printing, tricky and labor-intensive manufacturing processes become brainless and hands-off. The user doesn’t have to be determined or clever, and that could mean a lot of new users. Neither does the user have to care about producing just one item en masse. On a whim, they can make anything their printer permits – en masse, or just once. Traditional manufacturing is a Gutenberg press; 3D printing is an inkjet printer spitting out ebooks from “Project Gutenberg.” Denying this qualitative difference, where it applies, could have truly disastrous consequences.

This doesn’t mean that the future is altogether bleak for affected industries. “Subtractive” techniques, which carve and stamp new shapes from bulk material, often yield superior results, and the repertoire of printable materials is limited. Technical barriers on either front could relegate 3D printing to niche applications. Even in domains where 3D printing replaces traditional manufacturing, corporations could continue to turn a profit by selling and regulating blueprints – summoning intellectual property laws and adhering to the model of ebooks and online journals.

For service and logistics professionals, the future is even less predictable. Consumers who can make their own spare parts would presumably have less use for aftermarket service, and might forego troubleshooting and up-front screening for fully printable goods. But the challenges of production, assembly, and maintenance might demand a range of new services, and could transform the scope and toolkit of  screening, testing, and repair of returned goods, to say nothing of service and support for the printers themselves.

The effects of a 3D printing disruption will likely be unique to each affected industry – and unpredictable in all. As we’ve already suggested, game-changing events are more easily prepared for as a whole. Few important market disruptions can be planned for years in advance, but experience with the general phenomenon of disruption can help us respond adroitly to new ones. At Blumberg Advisory Group, our job is to bring our experience to bear on your aftermarket service and reverse logistics challenges – including those posed by 3D printing. Schedule a consultation today to see how we can add depth to your service supply chain strategy.