July 2009 | Commentary | 3PL Line

Mission-Critical Service Parts Logistics: Making the Impossible Possible

Tags: 3PL

Mission-critical service parts logistics requires sound processes, precision, and an organizational commitment to make the seemingly impossible possible. After all, guaranteeing expedited delivery within 90 minutes to four hours anywhere in the world can be a daunting challenge.

This is the reality that manufacturers and service providers face, however, particularly for high-tech equipment. With demanding service level agreement (SLA) obligations dictating minimal equipment downtime, and carrying exorbitant financial penalties, parts must be consistently accessible to field engineers for timely repair and maintenance.

REPAIR VS. BUY

The challenging economy further encourages a repair versus buy mentality as corporate IT budgets tighten. Many companies are seeking to maintain their high-value, high-tech equipment to extend life and delay new capital expenditures. The onus now falls on manufacturers and service providers to make this happen, or risk jeopardizing business relationships.

To support these requirements, readily available service parts are paramount. Those responsible for fulfilling aggressive SLAs need to consider several fundamental elements to make sure the right part is delivered to the right place at the right time.

These components include a comprehensive global IT platform, accurate visibility, and scalability that can require substantial investment to develop and support, depending on client base and geographical footprint. In many cases, a partnership with a well-suited third-party logistics provider (3PL) is a legitimate option to leverage variable resources and avoid the extensive overhead of fixed costs.

A comprehensive IT network is fundamental to supporting the movement of parts worldwide as efficiently as possible. Many companies make the mistake of maintaining disparate regional IT networks, which can limit the sharing of information, thereby duplicating efforts and mismanaging resources.

On the contrary, working from a single platform can provide a big-picture perspective, creating one massive inventory pool. Under a regional model, for example, a company in the United States might be in desperate need of a specific part, committing extensive capital to obtain the inventory. All the while, the same part is in surplus in South America gathering dust.

In this scenario, the company makes an unnecessary investment and squanders resources. This is a small example of what can regularly occur when operating in regional silos. A global approach provides a complete view that helps maximize inventory without compromising service.

ACCURATE VISIBILITY

The global IT platform paves the way for accurate visibility that facilitates inventory optimization. This is critical to avoid over- or under-stocking of expensive, high-tech service parts. It is simply impractical to keep every imaginable service part on hand for each equipment install, especially in a tight economy.

Accurate visibility can determine the exact volume of parts that should be made available to fulfill service obligations. It also provides an understanding of inventory location and quantity to determine when new purchases are necessary.

Even with accurate visibility, merely understanding quantity and location is not enough for a strategic approach. Data should be utilized to identify trends, such as the volume and frequency of transactions. This historical data will impact parts allocation, and help prevent excess and wasted inventory.

FLEXIBLE SCALABILITY

Detailed visibility, based on a comprehensive global IT platform, is only a theory unless parts are strategically positioned to meet strict SLA time parameters. Without a global network of locations to efficiently distribute and manage parts, commitments cannot be upheld.

This is where an outsourced partner's resources can become most valuable. As manufacturers and service providers strive to grow their customer base, they likely will need to expand globally. Attempting to achieve this broader reach internally requires significant investment, extensive overhead, and a tremendous amount of time to enter new markets. Many organizations seek to avoid this type of commitment.

A suitable 3PL that is aligned with a company's needs can offer the physical presence without fixed costs, and provide accelerated entry into new regions for faster revenue generation. Then, it is easy to scale back or reconfigure operations when necessary without being bound to investments that are no longer relevant.

Tough times and increasing customer demands call for creative solutions. Service providers and manufacturers with mission-critical service parts commitments should closely analyze the current state of their supply chain, and make necessary adjustments. These enhancements can lead to improved customer retention and increased market share.