8/14/2019 Gaining a Competitive Advantage: Insight for Dynamic Mission-Critical Service Parts Logistics in a Fluctuating Econ
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A CHOICE LOGISTICS
WHITE PAPER
Gaining a Competitive Advantage:
Insight for Dynamic Mission-CriticalService Parts Logistics in a Fluctuating Economy
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A recent Gartner survey concludes that global IT spending will
be essentially at in 2009. One third o respondents stated
no change in budget rom 2008, while just under hal projected
only a slight increase, and 21 percent said there would be cuts.
Researchers attributed this to global economic conditions thathavent existed or more than 50 years.
When coupled with numbers rom the U.S. Federal Reserves
index o industrial production citing a ull percentage drop in
inormation processing equipment in February 2009, it is clear
that the technology sector is continuing to tighten, a sharp contrast
to recent years.
As corporate spending drops, capital expenditures on new high
tech equipment are signifcantly impacted. Companies are
now investing more on upkeep o existing equipment, placing a
greater emphasis on repair and maintenance as opposed to new
acquisition.
Compromising the perormance o critical business processes
supported by technology networks is not an option. This repair
versus buy mentality creates a unique opportunity and places
increased demand on the resources o high tech manuacturers
and service providers. To be competitive, they must be prepared
to react accordingly.
To support this demand, a reliable supply o service parts assets
to keep mission-critical data networking, storage and telecom
systems unctioning is needed. This requires a sound supply
chain that can guarantee the right part, in the right place, at the
right time, to acilitate timely service and repair to ulfll new and
existing SLA obligations worldwide. Without the ability to deliver,
business is at risk.
To avoid jeopardizing contracts, high tech manuacturers and
service providers must adjust to these supply chain challenges
with a strategic and nimble approach. Companies that already
have internal bandwidth and expertise or this additional demand
are outside the norm.
More likely, an outside partner, such as a third party logistics (3PL)
provider, should be considered to accelerate the establishment o a
exible supply chain that can react to new end-user requirements
with a variable cost model at a moments notice. This paper will
explain the undamental components o a successul mission-
critical service parts supply chain. It will also detail the beneftsthat manuacturers, service providers and end-users can realize
with this strategic approach.
A powerul mission-critical parts supply chain is based upon a
reliable technology inrastructure that can support a global service
parts base, with granular visibility to manage assets, and the
exibility to react to evolving end-user demands as quickly as
possible.
Introduction
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Companies are now investing more on
upkeep of existing equipment, placing a
greater emphasis on repair and maintenance.
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To manage service parts inventories, many global businesses
tend to conduct control and oversight in silos, with each country
or region possessing its own unique IT platorm. This is largely
due to the enormous investment and resources required to install
and maintain a worldwide IT inrastructure. Yet, without a globalunderstanding o where service parts exist and in what quantities,
they cannot be accounted or and strategically sourced.
Working in silos is extremely counterproductive in a number o
ways. Primarily, the platorm cannot be accessed rom a single
point o entry to review and upload critical data necessary or
strategic part oversight and planning. Secondly, its impossible to
grasp inventory levels rom a micro level. For instance, parts just
purchased in Brazil may have been in surplus in Texas. Signifcant
resources are unknowingly wasted and spending increased or no
reason.
Maintaining multiple databases doesnt provide a complete view
o all available inventory globally which impedes accurate audits
and measurements. Whats more, additional cost is incurred rom
the specialized personnel needed to operate these systems,
duplicating overall eorts by region and creating unnecessaryoverhead.
By contrast, a global technology platorm can oer a distinct
advantage towards achieving a big picture perspective. This
platorm can provide access to all data in one place, eliminating
the need to gather disparate inormation that, even i available in a
timely manner, is not cohesive and uniorm. It can also streamline
the use and access o accurate data.
The advantages of a single global platform are many, most
importantly it allows for consistency of processes and the
uniform exchange of information. A sound system should
include:
Easy IntegrationA global platorm must integrate with existing databases in order to access critical data. Seamless integration also
circumvents the need to duplicate eorts when working with multiple databases. It is highly inefcient to manually
transer data rom one database to the other to share inormation, which is oten the case or divergent systems.
When applied exponentially, countless hours are drained, which is time that can be better spent ocusing on the
end-user.
Consistent UptimeWhile having a comprehensive and accessible global IT platorm in place is critical, it is not as eective without
constant uptime and availability. It must be exceptionally consistent and reliable, with 24/7 access to be viable.
I a system is down or even a raction o the time, important updates can be missed and the overall system
hindered. This can be detrimental i an end-user has an immediate mission-critical demand.
Web-based AccessI a system is not easily accessible, it cant be truly eective. A Web-based system oers convenient login access
regardless o location, with instant insight into what can be considered one giant worldwide inventory. This can
acilitate a much-improved ow o timely data that can be used to streamline the service parts supply network.
Archived DataReadily available access to extensive archived data or detailed historical trend analysis should not be overlooked.
Oten, historical inormation rom a ew years ago is as meaningul as data rom the last three minutes, yielding
actionable insight that can impact efciencies. It is not advisable to react to short-term anomalies and alterestablished processes without analyzing historically. Having long-term data available helps not only see the past,
but also predict the uture.
continued
Global IT Platform
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Global IT Platform continued
Reliable ReportingBeyond order entry and data collection, a global IT platorm can be an invaluable reporting tool. Reports can
be consolidated and easily summarized to reduce replication and improve accuracy. A prime example is using
reporting to assess the requency o service parts usage. I it is understood that some parts are used morerequently than others, adjustments can be made to trim overall inventory and thereby expense. Creating these
reports regionally is not nearly as eective.
Accurate PlanningReal-time access to centralized data or up-to the second inventory analytics is essential. As data is entered in
one location, it needs to be instantly accessible throughout the entire supply chain network to provide the exibility
necessary to adjust processes as end-user needs uctuate.
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Visibility
A ull arsenal o every imaginable service part or each piece o
installed equipment is impractical even under normal conditions.
When budgets constrict, accurate visibility can be used to
determine exactly how many parts must be in circulation to
maintain adequate service levels, without squandering resources.
With one IT platorm, a handul o experts can conduct planning,
as opposed to duplicating the same eort around the world with
multiple individuals ocusing on regional reporting. This greatly
reduces overhead and wasted man-hours, and is an area where
3PL expertise can help interpret the data and assemble it into an
intelligible ormat to make an immediate impact.
The very basic unctionality o visibility provides quantity and
location o inventory, but these simple observations are not
sufcient or strategic analysis, especially when managing
aggressive SLAs. Service providers must also understand exactly
how the parts are being used. Lucid data can reveal multiple
efciencies to help optimize inventory levels, resulting in reduced
capital expenditures and streamlined supply chain processes.
Granular visibility delivered through a
comprehensive IT platform can reveal
vital information such as:
Number and requency o transactions
Accurate global part movement and storage duration
Instant, real-time snapshot o current inventory levels
Inventory management optimization
Historical trends or detailed analysis
On time perormance or evaluation metrics
Customized data unique to each company
Global visibility provides a context to measure perormance to
ensure processes are being executed according to standard. With
solid data in hand, trends can be uncovered to prevent excess
and wasted inventory.
Global IT Platform Snapshot
The uniorm reliability o a global IT platorm has made a
tremendous impact on the service operations o one o theworlds best-known providers o IP-based communications
systems. With more than one million customers worldwide,
the company has the mammoth task o managing
approximately 90,000 service parts both domestically and
internationally.
By working with a mission-critical 3PL, the company has
access to an established global IT platorm without theburden and expense normally required or its depth and
breadth. The 3PLs system integrates with the organizations
internal operations oering real-time global visibility, tracking
and control to reliably access feld inventory, regardless o
location. As a result, on-time perormance and inventory
accuracy is dramatically increased, allowing the organization
to maximize assets and signifcantly control costs.
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Visibility-In-Action Can Include:
Macro-level visibility can reveal unused parts in over
abundance in one location that can be diverted to anotherthat consistently needs the same part, avoiding needless
restocking.
Legacy parts, which previously went neglected, might
be called into action or servicing an older machine that
a company cannot aord to replace, especially in todays
economy. Locating these assets in a vast service parts
network might be nearly impossible without accurate
visibility.
I a part is considered necessary or just in case delivery,
but is seldom used and creating a surplus, the excess
can be trimmed to cut costs. To maximize service parts
assets, it must be understood how long a part has been on
the shel to determine i those levels are necessary. I thechurn is too slow, money is being wasted.
Comparing current and archived data can identiy notable
trends that might otherwise go unnoticed. For instance,
when a major manuacturer observed consistent power
supply ailures o a specifc part within a condensed
timerame, a historical analysis revealed that this was
occurring almost ten years to the date o installation.
With this inormation, ailures were predicted, and
proactive replacement was initiated. As a result, end-user
satisaction soared.
Visibility Snapshot
Global inventory visibility is a valuable asset or a recognized
leader in network storage solutions. The company supports
equipment or Fortune 500 companies that serve as the
backbone o vital business operations and regulatory
compliance processes. With clients including fnancial insti-
tutions and airlines, consistent uptime is a must.
To reliably ulfll end-user SLA requirements, the company
retained the services o a mission-critical 3PL to manage their
vast global inventory base o more than 58,000 service parts.
The 3PL experts continually collect and careully analyze
network-wide data to identiy trends and anticipate demand.
This markedly improved visibility allows or rigorous tracking
o all parts or maximum control, which consistently results in
99 percent accuracy or worldwide service parts delivery.
The essence o scalability in a mission-critical service parts
network is directly related to exibility. This is where the global
IT platorm and its comprehensive visibility become invaluable. All
o the data generated is only theoretical unless the part can be
available where it is required in a matter o hours. To be executable,
an expansive physical inrastructure must be in place; extending
beyond large centrally located distribution centers.
Whether domestic or international, it is crucial to be wherever
required to meet current or uture needs. In uncertain economictimes, exibility is paramount. Even i a service parts supply chain
is adequate today, the situation can dramatically change tomorrow,
prompting immediate action, particularly in an ever-changing
economic climate.
To sufciently support the end-user, a service provider must
possess the exibility to have an inrastructure in place and/or
the ability to quickly orge new territory i necessary. It is simply
impractical or most companies to have a brick and mortar
presence, and the associated
overhead, strategically located
throughout the globe.
Only the largest, most established
organizations, ater investing decades and tens o millions o
dollars, possess this capability. For most high tech businesses, this
is without question where the global ootprint and resources o a
dependable 3PL come into play.
A strategically structured 3PL oers the capability to scale-up to
meet end-user needs, without the time or investment otherwise
required. A quality 3PL should already have the technology and
physical ramework in place to be active within weeks. This
nimbleness and exibility simply cannot be matched by a vast
majority o high tech providers.
continued
Scalability
Visibility continued
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Scalability continued
While the ability to ramp operations holds tremendous merit, a
scalable 3PL can also allow operations to shrink just as quickly. I
a client wishes to close a market or consolidate in another area, a
3PL can avoid leaving a service provider with the fxed costs o an
irrelevant operation. An outside partner has the exibility to moveas needs uctuate, without lingering expense.
A myriad of complexities are involved in market entry or exit,
despite the location. To be fully scalable with the ability to
react to evolving mission-critical demands, consider the
following:
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Domestic
International
Large-, or medium-sized, end-users will usually
have operations scattered throughout the U.S.
One company may require multiple, strategically
located stocking sites around the country to
support mission-critical execution o service parts
within two to our hours.
The need or multiple stocking locations within the
same city is not unusual to support mission-critical
needs. This prevents feld technicians carrying
ull set o spares, which is not only inefcient, but
also incredibly unsecure. A physical location is
a must.
Local culture and customs must be understood
and respected. This goes well-beyond compliance
with regulations and the associated licensing,
which can take months to obtain. Meeting these
requirements takes an extensive amount o
time, prohibiting accelerated market entry or an
unestablished entity.
Standard shipping processes defnitely dont apply.
Routes that may seem logical on the surace
might be completely impractical. An established
partner in the country or region will understand
these nuances without a steep learning curve.
Customs compliance varies wildly rom country
to country. Complicated export licenses and tax
regulations must be strictly ollowed, or parts can
be detained indefnitely. This is not only detrimental
or client service, but incurs hety fnes.
Scalability Snapshot
The ability to efciently scale operations to ulfll end-user
demands greatly benefts a global organization specializing
in data protection and management solutions. Ater humble
beginnings as a start-up, the companys customer base
rapidly ourished on global scale. To keep pace with demand,
they had to expand operations quickly.
To grow its worldwide ootprint almost overnight, the
company leveraged the resources o a mission-critical 3PL,
which possessed a comprehensive network o strategic
stocking locations. This acilitated growth, with minimal
investment and overhead, rom only a handul o orward
stocking locations to more than 200 worldwide sites in a
span o just three years. This expanded market reach rom
the U.S. to include all o North America and abroad in EMEA
and APAC, with more sites being added weekly.
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A comprehensive global IT platorm is the heart o the
symbiotic relationship between accurate supply chain visibility
and strategic scalability. These three elements combine to
create a stable ecosystem or mission-critical service parts
supply chain management.
Without the undamental base o a uniorm technology
inrastructure, a service parts operation can neither be
strategic, or ultimately, eective. In the absence o a global
understanding o where parts are located, how many are in
stock, and most importantly, the resources to get them where
they need to be, a company can be at a major disadvantage.
With uctuating economic times, there is a greater emphasis
on maintenance and repair o high tech equipment than ever.
Companies who wish to endure must be prepared to react to
an end-users service parts needs at a moments notice, or
threaten the existence o the relationship.
Identiying a 3PL with the global scope and sophisticated,
accessible inrastructure can help meet these demands
without the time consuming and expensive ordeal o
establishing an internal inrastructure. Those manuacturers
and service parts providers that can read and react to evolving
demands will be able to persevere, even in the midst o a
difcult economy.
Final Thoughts
Even i a supply chain is thought to be as optimized and lean
as possible, a well-versed proessional can demonstrate new
capabilities to the untrained eye. A 3PL expert can divulge
new possibilities or supply chain management, creating
valuable money-saving efciencies.
I this paper has raised concerns about the current state o a
mission-critical service parts supply chain, and its capacity
to adapt to emerging client needs, now is not the time or
complacency. To maintain and potentially increase market
share, a skilled 3PL can make an immediate impact, but
due diligence is a must. Beore moving orward, look or the
ollowing attributes rom any potential partner:
Going beyond the vendor/client contract to a
true two-way partnership
Willingness to collaborate and share critical
observations
Grasp o unique client needs to oer creative
solutions
Comprehensive global IT platorm
Meticulous reporting capability or highly-
detailed visibility
Profciency to analyze clients existing data to
impart new insight
Global scope to match current operations, with
scalability to meet uture needs
Non-asset based inrastructure or maximum
exibility in regards to locations, personnel and
transportation modes
Working with a
Mission-Critical 3PL
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