"Spare Parts:from undervalued challengeto profit-boosting opportunity" Giacomo O. Squintani, Marketing Manager from PTC presentation at Spare Parts Business Platform 2013.
Find out more http://www.sparepartseurope.com/
5. 5
you may well be thinking: “That’s great guys, but…”
SO WHAT? WHY SHOULD I CARE?!?
6. 6
Service Lifecycle Management Business Challenges
Fragmented Service Organization
•
Silos of people, processes and technologies
•
Increasing product and service complexity
Internal
Pressures
•
Growth and profitability center
•
New sources of long term competitive differentiation
•
Competition for executive mindshare
•
Talent retention and management
Immature Service IT Infrastructure
•
Disconnected data & processes
•
Homegrown systems lack scale and innovation
•
Service extensions from other enterprise systems (e.g., ERP+)
External
Pressures
•
Global economic difficulties
•
Customer expectations for faster, better service experience
•
Increasing product and service competition globally
•
Smart Products
•
From Product & Service to Product as a Service (PaaS)
7. 7
Service Performance Challenges Today
~80%
First-time
Fix Rate
25% of the time, service parts are not available or are wrong
Service errors resulting from outdated service information
Only
~56%
Service Worker Productivity
Low
Too many disparate sites for critical service content
40% of time looking for information
2-9%
Revenue Lost to Warranty Annually
Warranty data is not analyzed to identify trends for early corrective action
Suppliers are not traceable for supplier recovery
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you may well be thinking: “Look, I know all that…”
BUT STILL MY BOARD DOESN’T CARE!!!
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Shareholder Value
Profitability
Invested Capital
Revenue
Costs
Working Capital
Fixed Capital
Impact of Service Lifecycle Management
•
Part Sales, SLAs, PBL Agreements, Maintenance, Labor, Warranty Contracts
•
Purchases, Transportation, Labor, Repair, Handling, Customer Acquisition
•
Inventory, Repair WIP
•
Warehouses, Vehicles, Assets, Tools
Sources: Harvard Business Review, University of Michigan
Companies with High Customer Satisfaction Have Consistently Outperformed the S&P 500
Services Drives Shareholder Value
ACSI:
+94%
S&P 500:
+4%
Service Focus Creates Shareholder Value
11. 11
“Most companies have a fragmentedservice information technology infrastructure. This inhibits advancement in maturity because it prevents the efficienciesgained through improved visibility, scalabilityand collaboration.”
Supply Chain Transformation: The Service Life Cycle Management Maturity Model, Gartner (March 2011)
“After‐saleservice…operationsthatreallyaddvalue–thatenhancecustomersatisfaction, contributesignificantlytocompanies’revenueandprofitgoals,andpromoterigorouscostefficiency–arerare.
ThemostimportantcharacteristicofaServiceValueChainisitsclearintegrationwithallfunctionsthatinfluenceacompany’sabilitytoprovideservicetoitscustomers.”
The Service Value Chain (February 2011)
What GARTNER and ACCENTURE Are Saying
11
13. 13
Product Lifecycle Management
Requirements
Product
Optimization
Release
To
Manufacturing
Systems
Design
Service Part Pricing and Planning
Service
Information
Delivery
Service
Knowledge
Asset Tracking
& Management
Warranty
Processing
& Analysis
Field Service
Depot Repair
Products
& Service
Performance
Analysis
Detailed Design
Reliability & Maintainability Analysis
Service
Network
Optimization
Manufacturing
Planning
Service
Planning
& Information
Issue Analysis
& Corrective
Action
Service Lifecycle Management
Closed-Loop Lifecycle Management
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AVAYA
Challenges:
•
Achieve a consolidated global view
•
Integrate with legacy systems & ERPs
•
Improve first-time fill rates
•
Manage central and field stocking locations
Results:
•
Reduced inventory by over $90m / >10%
•
Avoided $5m in service parts repair costs
•
Avoided purchases through rebalancing
•
Improved first-time fill rates by over 30%
DELL
Challenges:
•
Meet the needs of >2m same-day SLAs
•
>200,000 part:locationpairs
•
Decrease inventory & maximize customer experience
Results:
•
Improved customer satisfaction
•
Record service levels (99.5%) with reduced inventory
•
Grew same-day service business globally
•
Implemented new 3PL strategies
•
Improved partner labour utilisation
Sample Results
small toys
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HONEYWELL
Challenges:
•
Required a quick implementation with minimum IT resources and integration with legacy systems
•
Had to improve customer service whilst reducing inventory
•
Needed to support the unique needs of the aerospace business across disparate business units
•
150,000 part numbers
•
14 R&O shops
Results:
•
Increased service levels to 91%
•
Reduced supplier lead times by 15%
•
Improved on-time delivery by 40%
KOMATSU
Challenges:
•
Lack of visibility at the dealer level
•
Inability to take into consideration part lifecycle
•
Need to reduce overall inventory
•
3 months to implement price books
•
Required a solution that would optimise aftermarket pricing utilizing market data, insurance claims information and build “what-if” scenarios which predict market response to price changes
Results:
•
Reduced global parts inventory by 18%
•
Improved service levels
•
Increased profitability by nearly $150m
•
Improved customer satisfaction
•
Priced new parts in less time
Sample Results
big toys
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FEI Confidential
2 Pillars of Spare Part Planning
Global supply chain footprint
• 3 hubs –covering 100%
of all parts
• 22 warehouses –
covering 75% of all parts
Part Segmentations
• Segmentation based on
popularity and cost
• Safety stock A parts is
highest, for C parts
lowest
P
D
C
A
10/24/12
20
21. 21
FEI Confidential
Daily Planning Cycle
•
Two global planners manage stock levels in all hubs & warehouses.
•
If the stock level is below the required level, global planner will initiate an order
P
D
C
AReplenishment orders•Inventory will be shipped from hubs to local warehousesPurchase orders•When levels in the hubs drop below re-order point, a supplier purchase order will be initiated
10/24/12
21
22. 22
FEI Confidential
Weekly Performance Review
Performance analytics focuses on 4 areas
A
D
P
C
Client•Client A always scores below targeted fill rate•Part segmentation should be re-assessedSupplier•Supplier B underperforms•Critical parts list is used to get supplier to focus on supply of certain partsRegion•Region X over performs resulting in high inventory cost•Safety stock levels should be adjusted Process•Inventory in warehouse Y is not booked properly •Retraining of staff is required
10/24/12
22
23. 23
FEI Confidential
Service fill rate has increased significantly since implementation in Q4 2011
The Results
10/24/12
25. 25
A journey to industry-leading level of aftermarket pricing sophistication begins
•Pricing tool RFQ, selection and project started
•Co-operation between business areas, regions and central services expands
2007
2008
•Initiated a Spares optimization forum
•Following Bain study increased focus to pricing
•Stop negative margin trade
•Spot 90 % increase in cost of hydraulic parts via margin erosion
•Currency reviews performed for certain assortment where neglected for years
.......
The quick wins justified the investmentto a pricing tool to increase the scopeof pricing work
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PRICING ENGINE
Demand
Current Cost
Current Price
Recommended New Price
Competitor Data
Location Attributes
MarkupInputs
Part Attributes
ChannelDiscount
CustomerDiscount
Net Price
Inside the PTC Pricing Tool
Outside
•
Price Alignment & Tiers
•
Market Adaptive Pricing
•
Elasticity
•
Cost Plus/Markup
Scoping and Setting Expectations
27. 27
The PTC Tool provides market level visibility to:
•
Cost and price data –consolidated margin
•
Transaction and discount data
•
Market data entry, storing and usage
•
...and allows advanced pricing policy setting and simulations
•
Segmentation of parts to separate buckets based on technical, commercial, market, business and etc. attributes
28. 28
Market-adaptivepricing
Between-marketalignment of pricing
Attribute-basedprice setting
Intelligent cost-plusand optimization
•
Compare current price and competitiveness, to market offering
•
Set prices to position competitively at market place
•
Act based on fact based information
•
Aim to have aligned prices between markets
•
Enable professional handling of multinational customers
•
Prevent cross border trading
•
Set priceof spare parts based on physical and performance characteristics
•
Pricesbetween items make sense for customer
•
Keyis finding the right drivers
•
Making competitiveactions relative to market share and additional business
•
Understandinghit rate, and lost sales
•
Mark-up factors based on modeling
70
x Value Index 51
Piston Diameter
x Importance 7
1410
x Value Index 92
Stroke Length
x Weight 10
< 50
x Value Index 55
Rod Diameter
x Importance 0.0
Attribute
Value index
Category
Importance
Application of Appropriate Pricing Techniques
29. 29
Insights concerning a pricing project
•
For operating a pricing tool the requirements for data format are strict, and lot of attention needs to be put to securing correct output
•
Dedicated and empowered implementation team that works from one location will secure success, and speed up problem resolution cycle
•
Via benchmarking we found the Servigistics/PTC pricing product to be structured, versatile and flexible
30. 30
Benefit realization of pricing systemand pricing strategy implementation
•
Financial targets have been achieved to date according to plan
•
Information available about transaction, customers, prices and etc globally on detailed level in real time, which also enables much more than pricing alone
–
Of course this information would be available otherwise as well via ad hoc reports, but continuous ad hoc work is not the way to go...
–
This can support e.g. sales, tendering, discount structure design, and etc.
32. 32
Strategy Coordination
Operational Coordination
Supply Chain & Manufacturing
Master Data
Project Accounting
Purchasing
Logistics
Supplier Quality
Production Scheduling
Production Control
Service Scheduling
Service Delivery
Parts Logistics
Warranty & Contract Management
Systems Engineering
Hardware Engineering
Software Engineering
Product Validation
Supply Chain Design
Cost Management
Risk Management
ManufacturingProcess Engineering
Tooling Design
Requirements
Application Engineering
Service Engineering
Parts Planning
Service Information
Failure Analysis
PTC
Optimizes
Strategy
ERP
Optimizes
Operations
Sales & Service
Hardware & SoftwareEngineering
Product Advantage
Service Advantage
Transforming How Products Are Created And Serviced
34. 34
“Leaders in service management… are likely to depend less on ERP to handle parts and service, since ERP systems often struggle in areas such as forecasting, managing distributed inventories and aligning resources with specific service or maintenance events.”
The Service Value Chain (February 2011)
34
One Final Perspective: Accenture
35. 35
“After a lengthy and rigorous evaluation program, we concluded that the Servigistics [now PTC] solution had a strong European infrastructure that could handle high levels of complex data, increasing the visibility and efficiency of our service parts operation”
Bernhard Weigl, Eurocopter
OK, one more…
36. Thank You for Attending
Giacomo Squintani
Marketing Manager
gsquintani@ptc.com
+44 7977 068176
www.ptc.com
THATis why your Board needs to care!
…any questions?