When Kia Motors Corp. (Seoul, South Korea) launched sales of its automobiles in the U.S. 11 years ago, its post-sales service organization didn't have to worry a whole lot about competition from after-market parts manufacturers. That's because there simply weren't enough Kia's on the road to attract major third-party parts competitors or service providers.

Today, however, Kia is no longer cruising under the radar. Eighteen months ago the company sold its one millionth vehicle in North America, stimulating intense interest from after-market parts manufacturers.

"One million was a trigger point," says Steve Green, director of parts and logistics at Kia Motors America (Irvine, CA). "It's now profitable for [aftermarket parts manufacturers] to go after our installed base. We've seen some aggressive tactics from them."

In order to fend off newly aroused after-market competitors, Kia is aggressively revamping several post-sales service processes, including the way it predicts demand for service parts in North America and the way it orders parts from the parent company in Korea. Kia America has replaced a homegrown forecasting system with the Demand Manager and Service Parts Planner tools from i2 Technologies Inc. (Dallas). The systems allow Kia to forecast and plan service parts demand down to the individual part number and location and to consider factors such as the impact of seasonality on demand. As a result, Kia has improved parts fill rates while reducing inventory and shipping costs.

The service parts planning revamp is part of a broader Kia initiative that includes rolling out standard operating procedures at parts distribution centers and beefing up marketing of support services offered by Kia's dealer network. "In the past, we didn't focus that much on things such as service parts," says Green. "But now we need to do whatever we can to defend our post-sales market."

SURPRISING VULNERABILITY

Kia's not the only manufacturer to have left its potentially lucrative post-sales service business open to poaching from competitors. Historically, many manufacturers tended to view the post-sales service side of their businesses as either a necessary evil or an entitlement. While most have invested heavily in recent years to automate production, streamline new product development and revamp supply chain planning and operations, many have neglected post-sales processes such as service parts planning and logistics, service call management and warranty claims management. As recently as 2002, according to AMR Research (Boston), enterprises on average devoted just 20% of their IT spending to improving post-sales service processes, while processes related to finished goods design, development and production soaked up 80%.

That's beginning to change, however. Manufacturers such as Subaru, Whirlpool, Kia and Cisco are beginning to devote more and more of their attention and IT spending toward improving post-sales service processes. In a recent survey of manufacturing companies by Aberdeen Group (Boston), 56% called improving field service a high priority. More than half said the priority level attached to field service has increased in the past one to two years.

NEWFOUND OPPORTUNITIES

Why? A couple of reasons. First, as manufacturers face increasing competition and pricing pressure on their finished products, many are realizing that improving post-sales service processes represents an opportunity to both significantly cut operating costs and drive new sources of revenue. "As product margins are getting pushed down, service is seen as a safe haven for profitability," says Ken Ruggles, a research director at AMR.