Service Parts Planning: How Hard Could That Be?
At first glance, Service Parts Planning sounds simple. Everything is an end item, no bill of material, and it is typically 10-15% of revenue. Digging a bit deeper uncovers a more complex process than what most people would expect.
The Bottom Line – Profits
In today’s competitive supply chains, end products are often commodities with tight margins. Service offerings can be a customer differentiator accounting for over 50% of a company’s profits. Customers appreciate the lower cost of a service repair vs. buying a new unit – a win-win for everyone.
Service Planning is Like Herding Cats
Most of us are familiar with the typical forward supply chain:
- Consensus end item forecast
- Set production master schedule for independent demand
- MRP dependent demand flows end item master schedule
- Production
- Ship units out the door
Logistics for service planning spans a dizzying array of parts and/or end units coming and going (also known as forward and reverse logistics). It is important for operations to keep track of which parts/units need repair vs. those where repairs have been completed. Service parts are mostly end items with independent demand, often with sparse demand patterns making statistical forecasting difficult.
Original Equipment Manufacturer (OEM) parts become unavailable, with multiple revisions of the same part being released. These differing versions of repair parts co-exist in inventory with various rules around part compatibility. It is also common for new and used versions of the same part to co-exist in inventory.
Service Technicians, measured on expedient repairs, naturally want every part possible available in trunk stock, while management typically wants to limit the overall inventory dollar investment. Service Parts Planners are expected to watch expenditure while ensuring parts are readily available to service technicians often resulting in a struggle to balance these expectations.
The Right Tool for the Right Job
To understand the need for part availability as a crucial element in a supply chain, consider professional race car teams. Professional race car teams roll out a massive tool chest before each race. When the car pulls into the pits, only specific tools for the job at hand go over the pit wall. Likewise, with Supply Chain Management applications, specific tools are designed and required for service part planning tasks.
Service Parts Planning Tool Chest
Forecasting – Forecasting for intermittent demand requires statistical models designed for that purpose instead of models used for high volume products.
Install Base – Service parts planning can be enhanced with information regarding units in the field. Key details include number of end units (volume), where the end unit parts are housed (location), and age of units (predictive failure analysis).
Supersession Chain Planning – Supersession chains provide genealogy information to track which part revisions will work for each end unit configuration. Information needs to be structured so that supply chain planning applications can place recommendations for each of the revisions as needed.
Part Condition – Service planners need to know the usability of a part. Is it good or defective? The parts often carry the same part number. Forward supply chain counterparts move defective units to a non-nettable sub inventory, out of sight. For service parts planning, defective parts are a key component to repair work orders.
Reverse Logistics – Reverse logistics is the process of moving parts/units from the end point (customer) back upstream to the manufacturer’s depot repair, third party repair and/or parts returning to central/regional warehouses. This can be the “money ball” of effective service planning. Parts that are repaired or upgraded to latest revision can significantly reduce purchasing costs. Planning for these returns with an anticipated repair yield rate is critical.
Lead Times Management – Supply requirements for a particular part can be covered by purchasing new parts, repairing defective parts internally, or repairing externally. Lead times for each option will likely be different, and supply planning needs to account for each of these situations.
Rebalancing – “Repair on first visit” is a key field service metric, affecting cost, as well as customer satisfaction. Parts are strategically placed in the field, as close to the point of use as possible. Rebalancing is the process of moving parts from one location to another as supply/demand patterns change, rather than simply buying additional supply for select.
Policy Planning – Policy planning is the practice of setting up common ordering and stocking targets that are applied to groups of items. Given that the typical service parts planner has a rather high number of SKUs to manage, this becomes essential.
Putting It All Together
Like a well-orchestrated pit stop, the tools quickly come together in a Supply Chain Planning engine. It is the simultaneous consideration of part condition, supersession, lead times, repair times, available supply across the supply chain, and the repair capability of internal and external facilities that sets effective spare parts planning apart.
As a recognized Oracle partner, Inspirage’s team of supply chain experts can help you in your quest toward effective Service Parts Planning. At Inspirage, we have created a library of innovative PaaS solutions, including our Spares and Reverse Logistics offering. Please visit the Oracle Cloud Marketplace to see a complete listing of Inspirage Solutions and contact us with any questions or to schedule a demo.
