There are several challenges associated with determining how current spare parts forecasting effects service levels. For many manufacturers and OEMs, forecasting still involves conducting time-consuming, manual analyses that rely heavily on projected or anticipated lead times and service metrics, which rarely occur in real time.
Even with those challenges, it can be highly beneficial for manufacturers, OEMs, and service providers to use spare parts management solutions with advanced modeling to simulate service scenarios —an exercise that applies forecasts to real-world situations. When you use software with robust simulation capabilities, you can:
Running simulations will enable you to get a picture of service levels and inventory, allowing you to plan ahead instead of relying on historical data. It also allows you to manipulate your data and see, for example, what the effects are on service when you reduce your investment in service parts. This is an important part of balancing inventory costs with the ability to deliver unparalleled service.
You may find that the savings in inventory costs are not worth the loss in customer experience or the cost of penalties when failing to meet SLAs. Conversely, if you want to achieve higher levels of service, you’ll need to invest more, but how long until you see an ROI? Running through a "what-if" scenario can show you that changing spare parts inventory levels may not get you the results you seek in a timely manner, which allows you to strategically make those decisions based on data.
In an ideal world, your suppliers would meet every SLA, deliver all parts on time or early, and worry about your bottom line before they discontinue a part you need. Of course, the real world doesn’t work like that.
When you incorporate supplier performance into simulations, you can make models allowing for lead time variability instead of only calculating lead times based on supplier SLAs. In addition to acquiring this insight, if your service simulation shows that your revenue is suffering as a result of poor supplier performance, you can go back to your supplier and renegotiate your contract so that the terms are more reflective of real performance. You can also model situations where your supplier is having a great deal of trouble meeting lead times, or cannot supply parts at all. Service simulations can show you how long it will take for your business to recover from these shortages. Often, you can mitigate financial losses from a supplier’s shortcomings by overbuying on safety stock, but why should you?
Knowing the impact of major business decisions before they affect your customers is immensely valuable, and is another benefit of using spare parts management software with robust simulation capabilities. You can run models for introducing a new SLA to your customers—can you afford to, and how soon can you provide it? If you’re planning on making changes to your parts and service network, modeling different scenarios can help you visualize the breadth and timing of the impact. Finally, you can also measure how a last-time buy may affect field performance over time.
By ensuring service parts simulation capabilities are an integral part of your spare parts management software, you can use real-world and real-time data to make better, more timely, and more prudent decisions over time, benefiting your bottom line and your customers’ experiences. Learn more about service parts management solutions by clicking on the case study below:
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