Manufacturers Increasingly Using Spare Parts Planning

IDC Manufacturing Insights today announced a new report, Business Strategy: Spare Parts Planning for Service Excellence. The report examines the subject of spare parts planning and service parts management for manufacturers and the current role spare parts planning is playing in the move toward more strategic aftersales service approaches by manufacturers. As manufacturers continue to competitively differentiate themselves within various industry settings, aftersales service will increasingly become more important in their overall business and profitability strategy. In fact, many discrete manufacturers can expect to capture upward of 30% of revenue from service and service-based product strategies.

Service parts planning (SPP) technology provides the all-important nerve center and control point for any service management process. The evolving 3rd Platform technologies of cloud, big data and analytics, mobile, social, and Internet of Things (IoT) provide additional enablers for transforming service management and service parts planning toward capabilities for more predictive versus reactive decision making.

Highlights of the report include:

• Many manufacturers’ service organizations still rely on spreadsheet, legacy, or a modified in-house ERP system to plan the unique and very complex needs of service management and repair parts networks. Too often, investment decisions are delayed until service performance or inventory goals erode.
• Investment in service parts planning provides the critical foundation and nerve center for enabling predictive and prescriptive planning capabilities, optimizing parts inventory, and providing opportunities for broader leveraging of connected service platforms.
• When considering an investment in SPP technology, IDC Manufacturing Insights recommends that in addition to due diligence on industry-specific capabilities and customer references, manufacturers probe on a vendor’s vision and investment plans for enabling more predictive service processes along with plans for leveraging 3rd Platform technologies.
• Technology selection teams must be well balanced with line-of-business, functional, and IT representation and should context a broader and deeper perspective in required SPP technology.

“In the coming years, manufacturers will continue to provide both competitive differentiation and higher margins by bundling or providing added services with products, including product-as-a-service business models where customers pay for product operational uptime and performance, over time,” said Heather Ashton, Research Manager, Service Innovation and Connected Products for IDC Manufacturing Insights. “IDC Manufacturing Insights predicts that by 2020, onboard service revenue will outpace product-related revenue by a factor of two. Customers benefit from such service programs through optimized usage of equipment and products, higher productivity, and decreased support costs.”

As noted in Perspective: Transforming After-Sales Services Through Innovation and Connected Products (Doc #MI251650), the majority of manufacturers are just starting down the path toward service innovation. The goal of connected service platforms is to transform aftersales service from reactive- to predictive-focused processes. With the emphasis on predictive, the paradigm of the service supply chain shifts toward early warning mechanisms, maximized uptime, and needs for precise synchronization of service events. This includes onboard and self-communicating diagnostics, providing early warning to operating issues, more responsive networks of service parts, and service depot suppliers as well as highly networked maintenance facilities.

IDC Manufacturing Insights recommends technology selection teams garner a broader vision of connecting the process components that will foster service innovation. This would include stronger process and information linkages among product life-cycle management, service life-cycle management, and customer relationship management (CRM). A further consideration is the trend across multiple industry segments of fostering new and existing product innovation by incorporating more and more software and digitally based product components within physical products.

“As manufacturers and service providers mature their capabilities working toward servitization optimization maturity over the next five years, SPP will increasingly be the nerve center foundation technology that enables the full optimization and responsiveness of the 3D value chain,” Ashton added.