Service management is integrated into supply chain management as the intersection between the actual sales and the customer. The aim of high performance service management is to optimize the service-intensive supply chains, which are usually more complex than the typical finished-goods supply chain. Most service-intensive supply chains require larger inventories and tighter integration with field service and third parties. They also must accommodate inconsistent and uncertain demand by establishing more advanced information and product flows. Moreover, all processes must be coordinated across numerous service locations with large numbers of parts and multiple levels in the supply chain.
Among typical manufacturers, post-sale services (maintenance, repair and parts) comprise less than 20 percent of revenue. But among the most innovative companies in Service, those same activities often generate more than 50 percent of the profits.
The main drivers for a company to establish or optimize its service management practices are varied:
High service costs can be reduced, i.e. by integrating the service and products supply chain.
Inventory levels of service parts can be reduced and therefore reduce total inventory costs.
Customer service or parts/service quality can be optimized.
Increasing service revenue.
Reduce obsolescence costs of service parts through improved forecasting.
Improve customer satisfaction levels.
Reduce expediting costs - with optimized service parts inventory, there is no need to rush orders to customers.
Minimize technician visits - if they have the right part in hand, they can fix the problem on the first visit. In fact, research showed that not having the right part was the main reason for technicians not being able to fix problems first time.
Generally, service management comprises six different capabilities that companies should consider for optimization: