| Abstract: | Many manufacturers view the post-sale service model as a necessary evil and a cost -- rather than profit -- center. However, the reality is that post-sale service represents 24% of manufacturers' revenue and contributes 40% to 80% of corporate profit. |
| Keywords: | post-sale service, durable goods manufacturers, Servigistics, service management, strategic pricing, demand history, field service, pricing management, scheduling |
Manufacturers often cite customer satisfaction as a top priority. But when it comes time to replace a faulty alternator in that American-made car or swap in a new hard drive after a customer's server crashes, it's rare to find a service technician rushing to the scene. All too often, the technician will show up hours -- or even days -- after an initial service call is placed, offering all kinds of excuses about not having the right parts back at the shop. To top it off, the supplier wants to charge a premium for the service.
This kind of treatment occurs because many durable goods manufacturers view the post-sale service model as a necessary evil and a cost -- rather than profit -- center.
However, the reality is that post-sale service represents 24% of manufacturers' revenue and contributes 40% to 80% of corporate profit, according to AMR Research. That's the good news. But the challenge for manufacturers is to find a way to capitalize on the service.
Enter Servigistics, a service management software vendor that offers a holistic approach to post-sale service that includes parts management, workforce management, and strategic pricing models. Formed in 1999, the company has focused on helping customers optimize service parts inventory. Its main product, Servigistics Service Parts Management software, is based on mathematical algorithms that calculate demand history and forecasts to ensure that the right part is available at the right place and the right time. The company has added two more modules to its suite that offer workforce management -- planning, scheduling, and field service -- and pricing management.
Servigistics, of course, is one of many service parts planning vendors in a market estimated at $100 million to $200 million, according to AMR Research. Servigistics, however, is "one of the fastest growing companies that we cover," said AMR Chief Research Officer Bruce Richardson in a recent market report.
Indeed, the privately held company, which has roughly 100 customers, is growing at a rate of 65% per year, says Servigistics Executive Vice President of Marketing Gary Brooks. The company's customers include automakers, such as BMW, DaimlerChrysler, Toyota, and Volkswagen, as well as medical equipment , heavy industrial, and computer manufacturers.
"Manufacturers, on a quest for opportunity to increase margins, are gravitating to the service side of business," Brooks said in an interview with Managing Automation. "It is the last available profit lever you will see in the enterprise."
Servigistics' products can be as complicated as figuring out the best competitive price for a product or as simple as mapping out the service technicians' routes for the day to "minimize windshield time and maximize wrench time," Brooks said.
Some companies, such as Dell Computer, use the Servigistics Enterprise Command Center, a sort-of network operations center, that shows a wall map with colored dots, each representing the state of a service call around the region. The dot shows green if the call went well, yellow if it's in jeopardy, or red if it failed. In the case of a failed call, the dispatcher can click on the red dot and drill down to see what happened. Dell has five physical Enterprise Command Centers located around the world, all hosted by Servigistics on the software side.
Implementations like this, Brooks says, prove that the shift is on from cost center to profit center. "They are realizing that there's an untapped opportunity on the service side of the house."
This article originally appeared in the June 2007 issue of Managing Automation.
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