may seem obvious to all of us, but the fundamental process by which technology
and equipment firms engage with clients have somewhat opposing processes and
needs. Modern service best practices attempt to harmonize these goals.
October 20th, I attended the annual Stanford/Wharton Service Supply Chain Forum.
At the outset, Morris Cohen of Wharton set the stage for our cross industry
and cross competitor sharing of ideas.
Professor Cohen, "Customers' main goal is to extract value from the goods and
services they buy—and in most cases, extend that value (use) as long as possible."
panel members reinforced this basic concept.
longer that cycle continues, the more likely the supplier will have to institute
and manage a so-called service business to support them. A trillion dollars
later—give or take a few billions—the B2 Bomber is still in use, the Under Secretary
of Logistics of the DoD reinforced. Less exciting, but also challenging to service,
a tool firm like Hasbro has equipment in the manufacturing facilities built
in the forties and fifties that still must give service (no one has invented
replacements for these).
are a few key issues that service providers need to understand if they intend
to design and deliver products and services that create and maintain that value:
on performance is the key metric—in the customer's eyes. Gone is the concept
of response time and fill rates, but rather availability or uptimes.
It's not about fixing broken things. But more important, it's about having
a separate line item for inventory or part that a customer pays for. Customers
expect and will pay for the performance, and leave the rest to the service
provider. We have several profound examples of firms attempting to create
these business models—Lockheed and Boeing working with the DoD on performance
based logistics (PBL).
The second key concept we learned was the need for total life cycle integration
for end-to-end knowledge sharing. Service data or returns data holds many
keys to product innovation design, yet many firms' supply chains are highly
outsourced, or pay little mind to returns, and therefore never mine
Eco system innovation, the point of performance—using and gaining value from
goods and services—is the result of a complex web of partnerships. With long
life value at stake, the decision to buy products is beyond just feature or
function, but buying into architecture—a continual stream of long-term innovation.
Outsourced models of service frequently put someone else in charge of the
dissatisfier zone—using the product for a lifetime. These models,
we heard, are designed mostly with sales reach, supply chain efficiencies
and cost in mind .. .hmmm ... how about delighting the customer? When we heard
the word customer used, most frequently it related to the OEM. This is still
a huge issue in service models.
after study has shown that customers will pay for extra service, yet the basic
model for service puts all customers on the same platform. One of the few things
the customers got right—special 800 numbers for Platinum customers. High tech
and a very bad rap with customers now with their outsource services (referenced
in other articles in this month's PV). Those who buy a $3400 laptop with a service
contract should get higher-grade service than those with the $599 product. Yet,
all wait in the queue to reach unskilled service call centers where employees
read through manuals and notes. Shame! Shame!
issue, as well as for the brand firm, is that this induces a POOR RELATIONSHIP
with the customer, destroying loyalty and future sales.
Molson says Selectron is thinking through these models, and gave some insights
on the insourcing or outsourcing of services. Warranty dollars are shrinking,
due to the lower costs of the price of hardware. (But one would assume there
is still decent margin here, since the reliability has gone up.)
in Outsourcing Versus Insourcing
to new markets or geographies
to developers and engineers
or after market reselling
are dropping—OEMs want to capture all revenue opportunities
knowledge and leverage
between partners seems to work over time since the hard definition of value—cash—is
understood. Yet the dissatisfied zone needs a lot of work. One interesting discussion
occurred about chemical services versus chemical sales in automotive. The ultimate
goal is not to buy and store chemicals, but rather to have just enough to manufacture
the car. Chemical service provides and charges for that outcome and managing
the supply chain, the disposal, recycle etc., and only charges based on each
manufactured car. Clearly, a lot of data drives this process—end to end.
the chain is crucial to aligning the goals of customers and provider. Left unsaid
is who will be responsible for integrating the channel. What also appears to
be true is the lack of dialogue and innovation at that last mile, the dissatisfied
to make more money? Be understanding and deliver high-end care for the
customer. Part of the analytic tool kit can help model this—again, that end-to-end
data may have some of the keys!
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more than two decades, Ann Grackin, Chief Executive Officer,
has been on the frontlines of the Supply Chain Management technology and e-commerce
frontier, leading global strategy and technology implementations in the high
technology, semiconductor, automotive, textile, and apparel industries.
Research is a bold new supply chain research organization dedicated
to helping executives improve business performance and competitiveness.