For way too many years now, after-sales service has been little more than an afterthought for the typical manufacturer. Most saw little appeal (and little profit) in spending hours arranging an urgent delivery of a photocopier drum cleaning blade or an automotive clutch and accelerator assembly through clogged streets during peak business hours. The result was that few devoted high-level logistics resources or expertise to service parts logistics, the business of maintaining and repairing cars, telecom equipment or photocopiers after a customer has taken ownership. The consequences were predictable—mountains of obsolete inventory piling up in far-flung locations, inflated costs and, often, disgruntled customers.
But that's about to change. Manufacturers are finding that they can make more money from after-sales interactions with customers than they do from original sales. "Everyone's been waking up to the fact that this is where the profit is," says Morris Cohen, founder and chairman of MCA Solutions, a service supply chain consulting group in Philadelphia. "It's easier to sell service products today than it is to sell a new factory or whatever."
Easier, maybe, but it's still not all that easy. Service parts logistics operations are typically tied to ongoing service contracts between a manufacturer or vendor and its customers or dealers. If you buy or lease a photocopying machine, for example, you probably pay a monthly fee that covers visits by a technician when the machine breaks down. Often, in the case of a law firm, for example, keeping a copier working is critical to the business (how else to produce mounds of billable paperwork?), so service contracts will typically specify a time limit for repairs—sometimes as low as one hour.
A one-hour limit may represent the extreme, but four-hour and next-day service terms are typical across the board of commercial and industrial service contracts. That means two things. First of all, there has to be a responsive customer service point of contact—someone available by phone or e-mail who can set things in motion quickly. Secondly, there have to be parts (and engineers or technicians) within quick reach of the customer's location, in order to hit those critical time windows.
The question then becomes whether to outsource these tasks or try to do it yourself. "Nobody argues any more that a company like IBM should be buying trucks and delivering stuff on the street," says Cohen. "Of course there are issues about how you outsource that effectively, but the next question is how do you use that to support a competitive logistics strategy and how do you manage the relationship with customers? There, I think, is a debate."
Split decisions
For many companies, the answer has been to split these functions in two. They have outsourced the physical distribution and delivery of parts, but have kept in-house the more sensitive parts of customer service.
Hewlett-Packard, for example, has outsourced the deployment and delivery of its spare parts to UPS Supply Chain Solutions (UPS SCS), but has kept in-house its service demand planning software, which it considers critical to the core business. This means that HP decides how many spare parts UPS is going to need to fulfill customer requirements, but UPS decides where to keep them.
"We only outsourced pieces of it, the pieces that we felt we didn't want to focus internal HP assets on and become the best in the world at," says Dennis Cain, vice president of HP's Americas global supply operation, based in Roseville, Calif. "Instead, we wanted to partner with a world-class [logistics service] provider.We thought that, with their core competencies, they would be best at providing transportation and warehousing." HP has held onto the planning part of service operations—deciding how much stock is out there and the level of service it wants to maintain. Cain explains the company has also kept the parts procurement piece in-house—such functions as establishing relationships with suppliers, introducing new products and deciding which service parts are required for them. "Other customers have asked UPS and others to do their service parts planning for them; we haven't. That's what we believe drives our financials and our customer experience," Cain says.
Lucent Technologies has adopted a similar strategy, outsourcing the warehousing and delivery of parts as one piece of a three-pronged approach to managing its service contract operations. Calls from customers in need of service are handled by a central Lucent facility in Columbia, Md., where reps work with UPS SCS to coordinate the delivery of a needed part with the arrival of a Lucent engineer. Meanwhile, the service parts function is being influenced by a profits planning software tool from Baxter Planning Systems of Austin, Texas, leased by Lucent on a Web services basis. This gives the company feedback on product failure rates and predicted new product build times.
Pat Nelson, Lucent's director of global post-sales support operations, says physical distribution of service parts is the piece best suited to outsourcing because it's the easiest. "We can take the parts delivery for granted," she says. "We can't afford to worry about it, and generally speaking we don't have to," she adds. That frees up Lucent personnel to address issues that require human intervention, Nelson continues. "That's something that no third party is going to be able to get close enough to do."
Even outsourcing just the physical distribution of service parts to a third party can bring enormous financial benefits, as can be attested by Visteon, a tier one supplier of automotive parts, including climate control systems, instrument panels, suspension systems and automotive glass. Sales to former parent Ford Motor Co. account for 82 percent of sales, and it used to be that after-sales parts were funneled through central Ford locations, then through about a dozen Ford distribution centers that would feed 9,000 dealerships. As a result, Visteon found itself with an average of 1.2 years' worth of inventory floating around—a nightmare in a world where some parts have a lifespan of only six months.
Now, Visteon uses third-party logistics firm Exel to run a centralized parts facility in Groveport, Ohio, which effectively bypasses the Ford network and delivers direct to dealerships. Visteon now keeps roughly one month's worth of inventory. "We still sell product to Ford, but physically we handle the entire distribution process [with Exel]," says Mark Nadel, director of aftermarket and service operations, based in Livonia, Mich. Nadel says a customer order can come in as late as 5 p.m. and still be shipped that day. "Previously, parts were sitting in 20 different depots, but typically they were the wrong parts, so delivery ranged from two days to upwards of a month."
Partners in time
Rethinking the way parts are kept and distributed is one of the many changes happening in the service parts industry. And no one is more eager than the third-party service parts logistics suppliers to keep up with the changes. Different industry verticals are adapting at different rates, says John White, Exel's senior director of business development. "A lot of what I'm seeing in the automotive industry is mimicking what happened in grocery a long time ago," says White. He explains that service parts used to be housed in product-specific warehouses, and different functions such as repair or calibration were done in different locations too. Now, White says, automotive after-sales service parts providers are "trying to change to broad-line warehousing that carries all the manufacturer's parts, and the extra services that you do to those parts are done in the same building."
UPS Supply Chain Solutions' David Adams says service providers are also feeling pressure from their clients. Companies that outsource their service logistics are looking for more and more, says Adams, director of marketing for the group. This is driving an increasingly chummy relationship between 3PLs and their customers when it comes to service parts logistics. "Trust is critical, because we're providing against their customer service commitments. As those tighten, the requirement for a relationship as partners is increasing," says Adams. UPS service parts customers also want UPS to make its own supply chain management technology compatible with theirs. "There's a convergence of the technology that logistics providers use in managing service parts for our customers and the planning systems that customers are using." Companies also want a more holistic approach, bringing service parts logistics into the fold of other logistics operations in order to increase overall efficiency. "More and more [clients] are looking for integrated solutions across all functions of the supply chain," Adams says.
Typically, that means a customer will now require UPS to keep parts in 200 locations in North America, as well as manage distribution and return of those parts. "People are asking for integration of service logistics functions, all the way from one-hour fulfillment to the return loop and the repair loop. Five years ago, people were prepared to deal with many different vendors to manage those processes or do it themselves," Adams says. "Now they're looking for partners who can handle that entire loop of activity." This has made it more critical than ever that UPS or any other 3PL work closely with manufacturers and vendors. "One important thing for your readers to understand is that it's not just about planning the allocation of parts across a highly distributed network and keeping track of that outbound flow," Adams continues. "A significant part of the savings that can be achieved comes from managing returns more efficiently, ultimately increasing turns on inventory."
Adams points to another challenge: globalization. "There's a lot of talk about the globalization of the supply chain generally, but the service supply chain is not typically the focus of that discussion," Adams says. "But service supply chains are growing that way as well. A lot of our customers have many different vendors across the world and want a more globally consistent service supply chain."
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.