by Dan Gettens, Chief Research Officer
More and more OEMs are outsourcing service supply chain (SSC) services on a large scale. Why? It enables them to drive visibility in their aftersales services and significantly lower cost-to-serve. According to Everest Research, aftersales accounts for 75%-80% of a product company’s core profits and is a major revenue center. To optimize the SSC, we recommend OEMs leverage specific SSC partner capabilities to build a comparative advantage.
Before I get into what those capabilities are, let’s take a quick look at comparative vs. competitive advantage. Managers instinctively leverage diverse skills across their company to generate comparative advantage. For example, say a sales exec is the best in both closing business and booking travel. No one would think about assigning responsibilities based only on who does tasks best—in this case, having the sales exec also book everyone’s travel (the competitive advantage approach). Instead, team-based thinking applies: how can we assign tasks based on opportunity cost so that the whole company benefits? In this comparative advantage approach, the exec admin assistant handles the travel and the sales executive solves client problems and closes deals.
For the same reason, we suggest OEMs assign tasks to SSC partners to maximize a comparative advantage. Who is better than your company in applying deep domain expertise to develop unique products that solve your customers’ problems? Probably no one. For everything else in SSC, can you outsource specific tasks to a partner so that your team can stay focused on your unique added value and generate an overall comparative advantage for your company?
The alternative approach would be problematic. It would require your company becoming #1 in many SSC capabilities compared to best-in-class partners. Could you do it? Perhaps. However, losing focus on your unique skills and diminishing your overall comparative advantage is likely too high a price to pay.
As you plan changes and investments in SSC, consider the following when selecting third-party solution providers.
SSC Service Provider Capabilities Checklist:
- Provides outcome-based segmentation with clear, intuitive profiles that highlight the unique needs of each segment across the Service Supply Chain.
- Identifies clear paths for process simplification and automation.
- Leverages voice-of the-customer (VOC) findings that include ‘drill-down on drill-down’ capability to define actions that drive ongoing improvement.
- Offers predictive analytics that can be configured across a range of SSC programs.
- Identifies beta drivers of success and obstacles resulting in failure across the service supply chain.
- Deploys Causal Effect Analytics that are auditable. To further increase objectivity, make sure the assignment of the control group can be reviewed and audited by you in advance, prior to realizing any end-customer outcomes.
- Measurably reduces end-customer efforts, including focusing on removing transactions that do not add value.
- Utilizes industrial-strength analytics and methodology that are up to the task. Embed the methodology in your processes and business culture.
Finally, consider adopting an outcome-based approach to SSC outsourcing and increase your comparative advantage by inviting your service provider to take on more risk, increase their accountability for clearly defined roles and implement deeper analytics. Outcome-based goals, for example, might include target quarterly savings from:
- Reduced remorse returns (with no-fault-found)
- Next service issue avoidance
- Lower transportation costs for dispatched service parts
This approach will make it possible for you to share goals tied to business outcomes so that you and your provider have a stronger incentive to enhance processes in order to improve results.
Interested in learning more? Contact Dan Gettens.
Dan Gettens heads OnProcess’ customer market research, which provides OnProcess clients with deep visibility and actionable insights into the customer experience. He also leads the definition, development and delivery of the OnProcess analytics platform that underlies our managed services offerings, including predictive analytics, in-depth Voice of the Customer analytics and initiatives to apply Lean Six Sigma methodologies in developing these methodologies.