After-sale service and part sales presents a gigantic market for powersports and equipment manufacturers. In the world of parts sales, for example, profit margins on OEM parts are often as much as 5x the margin on the original sale. That means an automobile manufacturer, for example, can net as much from selling $10 billion in parts as $50 billion worth of vehicles.
Unfortunately, most companies aren’t prepared to fully capitalize on this opportunity due to inefficient distribution channels, antiquated sales methods, and outdated technology. Dealers are geographically dispersed, have widely variable levels of technical capability, and are difficult to train uniformly. There may also be a cultural element at play: manufacturers are highly educated and attuned to sophisticated ways of maximizing production efficiencies, but the same mindset doesn’t apply to the service segment of their businesses.
Why? Because the challenges companies face in optimizing the manufacturing supply chain are quite different from those posed in improving service and aftermarket sales. Let’s look at 10 of the biggest differences between managing a production versus an after-sale service supply chain:
|Manufacturing Supply Chain||After-Sale Supply Chain|
|Market Demand||Changes gradually over time and can be somewhat accurately predicted||Varies based on factors that are not easily measured or predicted (e.g., weather, product malfunction); service must react quickly and adapt to change|
|Response Time||Long-term, scheduled in advance by manufacturer||End customers have immediate needs for parts or service|
|Number of Products||Relatively few||Could be thousands or millions of different part numbers, covering entire history of production|
|Type of Products||Similar||Widely variable, can include personnel as part of service delivery|
|Distribution Channels||Multiple dealer/distribution channels||Usually one network that must deliver multiple types of service|
|Inventory Goal||Speed up movement of resources through the production process||Have resources in the right place at the right time|
|Two-Way Traffic?||Products move only one direction through distribution system||Returns and repairs require managing reverse logistics|
|Length of Customer Relationship||Ends when product is sold||Could be 20 years or more for products with long service life (long-term revenue stream)|
|Product Turnover||Up to 50x annually||1-4x annually|
|Technology Maturity||Highly developed ERP and EAM systems||Still in early stages of integrating field service and sales into enterprise systems|
As you can see, there are many areas of opportunity for forward-thinking companies to gain a competitive advantage and increase top-line revenues from after-sales service and OEM parts sales. In order to do so, they should focus on each of the items listed and determine if improvement can be addressed through new technology implementation, workflow or process improvement, or other action.
Can market demand be more accurately predicted with a better system for tracking customer behavior? Can response time be speeded up through a more efficient ordering process, or better inventory management? Can the delivery of technical documentation be upgraded to provide dealers and service personnel with updated, rich content? Answer these questions correctly and manufacturers can take a big step toward increased loyalty and better sales figures.