When your organization thinks about driving more revenue, what comes to mind first?
Maybe you think about having field techs sell additional services while they are on a customer site. Or maybe it’s creating incentive programs for contact-center agents to upsell a customer before a call is closed.
These are just two great opportunities to unearth new revenue streams for the service organization. And top-performing organizations are able to use these service channels to improve revenue creation.
But how often has your organization looked to improve service parts management to drive revenue growth? In Aberdeen’s recent Service Parts Management 2013: Align Planning and Forecasting with Efficient Resolution report, nearly a third of organizations said they saw opportunity for increased revenue streams through improved service parts management.
This desire to uncover revenue opportunities from service parts is the culmination of multiple business trends:
A profit-centric approach to the entire service lifecycle has become a reality for business. Not all organizations manage their service business as a profit center with a dedicated P&L or service leadership. Yet nearly three-fourths of top performing organizations (as defined by performance in customer retention, customer loyalty, annual improvement in overall company revenue and service revenue) manage service as a profit center.
Each service function must not only contain costs (i.e., escalating inventory carrying costs, logistics costs) but also stimulate revenue growth. Specifically, service parts have the ability to drive revenues through advanced parts pricing models which better align value to customer needs and the resell of refurbished parts.
Satisfied customers lead to recurring revenue streams. Organizations must be mindful that a key to driving increased revenues is the satisfied customer. In Aberdeen’s State of Service Management research, organizations that had a 90 percent or above satisfaction level were able to drive an annual improvement of overall revenue of 3.7 percent and service revenue of 6.1 percent as compared to a 1.7 percent and 2.9 percent decline respectively for those that had a poor customer satisfaction rate.
Service parts play an integral role in ensuring that the organization can satisfy customers. Aberdeen’s recent Field Service Management research shows the top complaint from customers is technicians not being able to resolve an issue. And the number one reason why techs aren’t able to resolve an issue the first time is not having the right part when they are on site attempting to resolve a customer issue.
Better alignment of resources directly impacts the bottom line. Two of the top internal challenges facing the service operation in regard to parts management are inventory visibility and the quality of parts forecasts. The inability to have a clear picture of service parts throughout the service lifecycle and effectively manage fluctuating service demand can negatively impact inventory costs. Carrying excess inventory, to meet service demand and customer expectations will eat away at any profit gains and thus needs to be avoided.
The service parts operation can be a great resource for driving revenue channels, while also being a key to enhancing the customer experience. Other functions of the service organization may be flashier at times, both in their direct contact with the customer and visibility with management, but service parts management is nonetheless important.