Last modified: March 29, 2018
Service sector business currently accounts for about two-thirds of the U.S. Gross Domestic Product, and about 8% of economic growth. A recent CAPS Center for Strategic Supply Research study found that purchased services averaged 39% of total purchasing spending. However, about 69% of the supply chain management professionals surveyed indicated that purchasing services is more difficult than purchasing goods.
In light of the increasing trend towards outsourcing business processes and the likelihood of moving these business processes to offshore locations, it is prudent for organizations to focus on improving the means for obtaining these services.
While after-sales service on average represents 24 percent of revenue, it generates a whopping 45 percent of profit, according to a recent AMR Research study. Why? As products become commoditized, new products develop shrinking margins and become harder to sell, so opportunities to drive profit through enhanced service offerings increase.
After-sales support provides a low-risk, long-term revenue stream, particularly when customers own products for extended periods of time, as they do in industries such as aerospace, where product lifecycles can be as long as 25 years.
Improving service quality increases customer satisfaction, which, in turn, increases new product sales. As outsourcing grows and manufacturing becomes increasingly competitive, effective after-sales support helps drive opportunities to enhance customer value.
Effective management of supply chain processes concerns many more factors than traditional supply chain management. In the digital age, service supply chain management has evolved to include increasingly technologically-complex functions, use of cloud-computing for applications, increased use of the Internet of Things (IoT), and additional telecommunications processes. Furthermore, the growing interconnectedness of consumers and manufacturers demands a rapid solution to potential problems and proactive action to minimize downtime for all supply chain practices. Take a look at how these factors influence service supply chain management in the digital age.
Greece’s recent economic crisis identifies how quickly the world market can change. While the politics of the region determine the viability of differing aspects of service supply chain management. For example, resources in one area can become scare within hours in a neighboring country suffers from economic collapse. Unfortunately, economies have become dependent on the actions and progress of other countries when thinking about the global impact of Supply Chain Management (SCM).
Additionally, one area may demand greater imports of a given product, and another area may suddenly drop from the order fulfillment screen. In a perfect world, the influx of orders would remain constant across all countries, and the only way to combat this concern is through a careful analysis of market trends in respective countries, especially those that rely on the state of the country’s economy. Service supply chain management must carefully consider how technological factors influence each area’s economy to forecast estimated needs for a given product in the area.
In the US, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires companies to disclose what minerals are used in the manufacturing process. Ultimately, this is the government ensuring poor manufacturing processes are not being used, which could threaten the environment, or humanity’s ability to survive. The reporting of such use can become exceedingly complex as each piece of machinery involves the use of minerals in machine-production. For example, steel and aluminum in machines represent mineral use, and therefore, aluminum, iron, and zinc must be reported to the SEC. SCM providers eliminate the confusion and complexity of the process from business-leader’s hands, which allows them to focus on developing new, better products and growing their consumer base.
Telecommunications include a broad array of processes within service supply chain management. They include inbound and outbound marketing telephone calls, conference calls, the storage and transfer of consumer and company data, additional marketing efforts, communication between departments within a company among others. The impact of telecommunications on business success cannot be overstated.
Fortunately, SCM providers in service parts supply chain management have the purchasing power necessary to obtain the best rates from telecommunications’ providers. For example, purchasing an allocated amount of server space and bandwidth in a data center may sound simple. However, data centers often charge less when a company purchases, or rents, a given amount of space in higher quantities. This server space is then used across all aspects of the supply chain, which may include management of robotic processes in manufacturing, automated identification of distribution needs, assignment of orders to varying distribution centers, and notification of availability, status, and arrival of service parts.
Another key aspect of telecommunications to consider remains security. Keeping consumer and business information confidential, but usable, has become a huge topic of concern in recent years, especially when considering the potential impact of stolen identities. Furthermore, online criminal activity can result in extortion, financial ruin, and distrust of a given company. In the same manner of higher purchasing power, SCM providers within the service parts supply chain have the opportunity to devote more resources to monitoring security across the supply chain spectrum. At first glance, it appears fewer resources are needed since the application of each resource is extended in pain-staking detail to each aspect of the supply chain. For example, the implementation of data center use for a company grants access to the data center’s physical and software-driven security features, such as restricted personnel access and advanced encryption measures. This drives consumer confidence.
In the past, cold-calling was seen as an acceptable form of marketing. However, government restrictions and penalties on such marketing methods have resulted in their obsolescence. In the service supply chain management, marketing could be defined as monitoring retail locations for needed items. SCM providers within this field use multiple, automated resources to remotely monitor physical, local needs and produce resulting orders, increase production of individual items, and ship such items on scheduled dates without the need for interference in routine business activities.
When searching for an SCM provider for service supply chain management, business owners need to think about the influence of telecommunication and globalization on their business. Furthermore, a typical SCM provider must extend their processes into the digital age by reaching into the focal points of the consumer base, which include growing ecological concerns, privacy issues, and convenience. By following these needs, a business owner can identify which providers align with the needs of the business, as well as the needs of the consumer.
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