Gaining a Competitive Advantage: Insight for Dynamic Mission-Critical Service Parts Logistics in a...

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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