Service logistics: How can companies be fast, flexible and responsive?

The desire to become more customer-centric is forcing companies to rethink their service logistics operations.

Companies traditionally focus most of their effort on upstream activities: designing, making and selling their products. For customers, the overwhelming majority of the experience is downstream; they may spend a few hours selecting and purchasing a product, then live with it for years. Recognizing the asymmetry of that relationship, manufacturers are increasingly looking for ways to better support their customers – not just up to the point of sale, but for as long as their products are in use.

There’s no bigger test for a company’s customercentricity than its response when things go wrong. You can build the most powerful and sophisticated tractor in the world, but that means nothing if the farmer can’t fix a breakdown in the middle of harvest season. Your wind turbines may be more powerful and more efficient than those of your competitors, but they won’t make money for your customers if they are shut down waiting for critical parts.

One important effect of this new focus, according to the authors of a new DHL white paper – “The Future of the Services Supply Chain” – is the need for smarter, more capable service logistics networks. Service logistics encompasses the supply chain activities necessary for the support of products in the field. It includes the operation of appropriate inventory locations for spare parts, consumables and replacement products; the delivery of those items to field technicians or customers; and the design, management and analytical tasks required to optimize those activities.

A vital part

Today’s focus on better service logistics has a number of underlying drivers. For one thing, customers are demanding it. Fast, flexible and responsive service has become the norm in the consumer space. Customers now expect the same in the business world. Additionally, efficient service logistics is a key enabler of many of today’s new technology-driven offerings. Remote condition monitoring or diagnostic capabilities, for example, are only useful if replacement parts are available to fix problems when they happen.

Service logistics isn’t just becoming more important, it is also getting more challenging. Big customers – common in the Engineering and Manufacturing sector – want consistent, high levels of service wherever they operate in the world. And there’s the “servitization” trend, where companies offer their customers guaranteed levels of performance and availability. That shifts more of the costs – and risks – of the service parts supply from customer to equipment provider. Finally, the growing importance of sustainability means that customers are looking for products with a longer working life, as well as asking providers to take worn-out parts and machines back at end-oflife to be reconditioned or recycled.

Predicting the future

How can companies upgrade their service logistics capabilities to meet these new demands? The white paper outlines a range of strategies that are already helping some companies ramp up their offerings while keeping costs under control. Right now, many of those strategies involve smarter use of data. Predictive analytics, clever forecasting algorithms and machine learning technologies can all help companies to put the right components in the right places across their service logistics networks. And the power of those approaches is being enhanced by new sources of data, including real-time information from the field provided by connected equipment and internet of things (IoT) technologies.

Further technology-enabled opportunities are following close behind. They include the use of augmented reality technologies to improve the communication between organizations and their field technicians, or the additive manufacturing (AM) machines to build spare parts on demand.

“Companies across all industries are waking up to the fact that a customer-centric business needs advanced service capabilities,” says Scott Allison, Chief Customer Officer at DHL Service Logistics. Technology is set to redefine the way service supply chains are designed, managed and run, he adds, but smart solutions need the right foundations. “The key challenge for many companies today is getting the basics in place, things like standard processes and a comprehensive global picture of demand, inventory and availability.”

Published: January 2020

Image: Luis Alvarez/Getty Images