It’s time for manufacturers to stop leaving hidden profits on the table

Manufacturers with after-sales service organisations are racking up hidden costs from capital, service, time and resources by simply relying on their traditional ERP systems for service parts management. With higher customer expectations than ever before, manufacturers need to look at new ways to maintain customer loyalty and elevate the overall integrity of the brand. What many don’t recognise are the profit opportunities in optimising inventory and part availability.

A traditional Enterprise Resource Planning system (ERP), used by many manufacturers today, is an information system that integrates areas such as planning, purchasing, inventory and sales throughout an organisation. However, this kind of system doesn't inherently eliminate inefficiencies within the business. Manufacturers looking to move with the times, keep customers happy, while also keeping costs low should aim to optimise all aspects of their business. Here are five points that highlight how traditional ERP systems cost companies money every day they go without an intelligent service parts management solution:

1. It’s all manual. Relying on ERP for service parts management still requires manual processes (not to mention multiple reviewers) to achieve acceptable inventory performance. This means time and budget are being spent managing the ERP system, rather than on worthwhile cost-saving projects.

To minimise manual effort, and ensure more efficient processes, the best service parts management solutions use end-customer demand to create pull-driven replenishment planning at all levels of the supply chain. And with the goal of increasing service and optimising inventory, the process takes into account existing stocks, local and global planned movements, variable lead times and replenishment planning policies.

2. It’s not predictive. ERP systems lack the necessary analytical tools to predict the impact of changing service levels, stock levels and invested capital targets. Balancing service levels against inventory levels can pose a big risk, with significant cost implications. Inventory analysis and simulation, provided by a modern service parts management solution, can help improve decision-making and produce “what-if” scenarios before implementing major policy changes.

3. It’s not global. ERP systems are simply not designed for global, multi-location service part distribution networks. Modern service parts management solutions are designed specifically for multi-level inventory management, producing an accurate forecast at all points in the service lifecycle of a product, and planning across the entire service supply chain to optimise and right size inventory. Not to mention, service parts management solutions that can provide users with full network inventory levels from a single screen equip organisations with the best possible information for decision making.

4. It’s disconnected. Many manufacturers have locations that operate through independent systems, and these disconnected systems add levels and levels of inefficiency throughout the service supply chain. A single service parts management solution, however, lays the foundation for a coordinated global service supply chain across multiple systems. It’s hard to argue with the immediate benefits of a coordinated system, like improved excess material utilisation and better global inventory positioning.

5. It’s antiquated. Traditional ERP systems lack advanced, modern functionality, which is required for modern service parts planning. One example is planning for rotable parts, which is different than planning for consumable parts. Automated, cloud-based service parts management systems provide advanced optimisation for rotable items and dynamic inventory policies. Inventory management systems manage scenarios that take into account the repair lead time versus supplier lead time, along with the effect of scrapping.

So, while traditional ERP systems can leave businesses in the dark about the relationship between inventory management and customer service, modern service parts management solutions can help manufacturers increase margins, customer service levels and overall uptime standards.

It’s plain to see that deploying an intelligent service parts management solution not only reduces hidden costs behind antiquated ERP systems, but improves efficiency on all fronts of the after-sales service process. So, what are modern manufacturers waiting for?

Gill Devine, VP for Western Europe, Syncron