Reverse Logistics Today Blog

How to Increase Services Revenue

Mon, 27 Feb 2012 06:01:00 GMT

Aftermarket services revenue can boost profits and increase customer satisfaction and loyalty.

Market forces that increase their costs are always squeezing OEMs. Raw materials, fuel, supplies and shipping are big expense items. At times, companies are reluctant to pass these costs on as they fear customers will look for alternative sources of their products.

Often overlooked by smaller OEMs, is the profitable aftermarket services they can provide. Some of these are offered as free services and others may be new services for an OEM to offer. However, aftermarket services revenue can help boost profits.

End users are keeping equipment in use longer. While this presents a problem for OEMs when it comes to selling new equipment it also creates opportunity by providing additional services after equipment is sold.

Before undertaking a shift to selling services in the aftermarket arena, it is necessary to do research on your existing installed base. The following questions need answers:

What equipment will you service?
Where is it located?
Who is the owner?
How many units are in the installed base?
Who will be the customer?
What is the quantity of customers?
Where are the customers located?
How many of the installed base will buy our service and how many installed units do they have?

After the above questions, an OEM can determine if it makes sense to offer maintenance and repair services directly to their customers. An analysis of existing customers must be undertaken. If there are thousands and thousands of units installed and working, then it may be sufficient to perform a sampling survey.

Companies with little experience in aftermarket services ought to consider the services of a consulting firm that specializes in the High Technology Service Industry. They can provide expertise in determining which services to offer and how best to provide them. Many times outsourcing these services makes the most sense and provides the highest profit. An aftermarket services consultant can advise you on contracting with a 3rd party outsourced company to provide the aftermarket services that you want to provide.

1. Service contracts: Offer service contracts to your customers. Who can provide better maintenance of a piece of capital equipment than the company who manufactured it? Your existing company base is a very valuable asset to market this service to. It makes sense to most people that manufacturers can best service the equipment they manufacture. If as a manufacturer you do not have an outside service department, explore outsourcing. It will be cheaper for you to provide "factory authorized" service by outsourcing. Periodic service will keep your customers confident in their selection and they will come back when they are ready to buy again.

2. Repair service: Many smaller manufacturing companies do not provide factory service unless an item is returned to the company. For large items, this may be impossible and for all equipment, it is an inconvenience. Here again your existing customer base is a built in market for paid on-site service. Even a single site manufacturer can provide on-site service by outsourcing. If your call center handles the service call by getting the appropriate information, and then dispatches the outsourced repair company, you have an opportunity to make a great impression and keep your client base happy.

3. Outsource installation: Often, companies do not provide installation services. However, if you make this one of your aftermarket services and use a company that you outsource to as the installer, writing installation into the sales contract is easy.

4. Waste disposal: When you get your oil changed in your car there is usually a fee for disposal of your old oil. You generally do not even have a choice, either pay it or take your old oil home! Today, manufacturing companies are trying to comply with environmental laws and build a good community reputation. Selling a piece of equipment or as a replacement charge a disposal and recycling fee. Of course, this is part of the sales contract but is actually one of the aftermarket services that will help build your aftermarket services revenue. This is an easily outsourced way to make more profit.

Takeaway
As your organization evolves greater sophistication in aftermarket service, your company can provide other services. Today IBM makes more money from its global services (aftermarket) then it does from sales of hardware and software combined.

Related Information

Aftermarket Services as a Profit Center Part II

How to Reduce Aftermarket Services Cost

Service Mobility for Efficient Aftermarket Services

How to Reduce Aftermarket Services Cost

Mon, 20 Feb 2012 06:01:00 GMT

You can find cost savings and hidden profits in aftermarket services if you know where to look.

Many people may see this opportunity as solely involving parts inspection, repair or replacement. These same people most likely will benefit from a top-to-bottom review of aftermarket services. There are opportunities for cost reduction, just in the warranty service segment of aftermarket services, assuming the decision is to keep the service in-house.

Incoming logistics: no matter how the defective part arrives, there is a cost associated with it if the OEM is paying for it. To control costs for warranty returns, OEMs should…

1. Only accept warranty returns shipped by your contracted shipper and that have a Returned Merchandise Authorization number.

2. Rather than have a call center person assign RMA numbers, explore having a technical support person on the phone or via online chat. Parts returned may be in perfect working order but as the equipment is new, a minor install glitch or explanation of how the part functions maybe the actual problem. Solving the problem before a part returns results in several significant cost savings.

no in-bound shipping or handling costs
no labor costs expended inspecting a perfectly good part
no out-bound shipping expense

Of additional consideration is the aspect of customer satisfaction associated with restoring equipment to service without a part exchange or a service call.

Nevertheless, aftermarket services are often not the strategic competency of most OEMs. In fact, aftermarket services are a different industry entirely. For this reason considering the outsourcing the entire function should not be overlooked - this means forming a partnership with a company that does all warranty repair for you. This includes:

in and out-bound shipping
repair or replace decision-making
intense, warm and empathetic customer relations to attempt a resolution without a part or total piece being returned

Ideally, an OEM’s outsourced warranty service provider will have facilities strategically placed throughout the country to keep shipping costs low and turn-around time rapid.

Warranty returns and repairs are part of the old paradigm for aftermarket services that viewed aftermarket contact with customers as a necessary business expense. Smart organizations are viewing these same services today as a source of revenue.

A lucrative aspect of the aftermarket services is maintenance. Once again, this is ideal for outsourcing to a company that does maintenance work as a core competency. To keep warranties in effect, sell maintenance plans at the time of initial sale. Your contracted maintenance provider should have strategic country-wide locations to service your clients from, a stock pile of parts so that service is usually a single call to the customer and be kept up-to-date by the factory to make sure they know of equipment changes and/or known issues.

Extended warranties make for great upgrades at the time of purchase. The purchaser pays the company up-front for services that are not rendered until a future time. Using the same outsourcing techniques and completing the warranty transfer at the time of sale, gives the manufacturer more money. By paying the outsourced warranty, expense with today's dollars by contracting the work out, the time value and opportunity cost of money benefits the manufacturer.

Product installation is often included in sales price, but most folks consider it an aftermarket service. It makes perfect sense for the manufacturer to engage the same company that will do its contract maintenance and field service to perform installations. This creates a relationship between buyer and service provider from the start.

Disposal and recycling of parts and total product has become an important of the reverse logistics chain and aftermarket services. Manufacturers have to be aware of regulatory changes in their own industries, complying with those is hard enough. Environmental regulations regarding disposal and recycling is an extraordinary challenge, if it is not your core business. This function to be outsourced to a company that can do it for less and whom will assume all risk for non-compliance.

Aftermarket services are an increasing source of revenue for OEMs. Paradoxically, OEMs who outsource aftermarket activities can reduce the cost of providing services and increase profits too. Services that are excellent candidates for outsourcing include:

Warranty repairs and replacements
Extended warranties
Installations
Service contracts
Disposal and recycling

Takeaway
Many companies find it useful to engage consulting firms who have expertise in creating a strategy for maximizing returns on aftermarket service by creating tactics that reduce costs and improve customer satisfaction. A key component is any company’s drive to excel, is to look at aftermarket services as more than a cost of doing business but also as an opportunity to profit from.

Related Information

Service Lifecycle Management: What's a Lifecycle Worth?

Service Lifecycle Management: Benchmark Findings

2012 Opportunities In Aftermarket Services

How To Increase Services Profits

Mon, 13 Feb 2012 06:01:00 GMT

Astute aftermarket services firms are quickly finding new profit opportunities that come after the sale.

Businesses are seeing pressure on their profit margins and customer loyalty remains difficult to maintain. Manufacturers of high-tech equipment are especially prone to volatility with their end-users.

Whether its computers, cars, or high-efficiency heating and air conditioning units, the first company with the newest technology has an advantage in getting new customers. The actions of consumers then puts a strain on companies with a large installed base, but no products near release, Wisely, these manufacturers have turned to aftermarket services to provide additional profit and maintain customer loyalty by establishing an extended relationship with the customer.

Aftermarket services goes by many other names including, After Sales Services, Post Sales Service/Support, Product Support, and Service Life-cycle Management. It does not matter what a company calls it, Deloitte completed a study back in 2007 that showed at that time the aftermarket services profit was as much as 75 percent greater than the profit from manufacturing, even if one were to include selling repair and maintenance as well as parts and accessories.

What Comprises This Profit?

With ongoing and speedy technology advances along with rapid deployment of new and more complicated products there is increasing demand from buyers for numerous additional services such as installation, maintenance, repair, extended warranties and consumables. One estimate pegs expenitures for consumables at five to 20 times greater than the equipment purchase price.

Astute manufacturers are quickly moving to take part in profit opportunities that come after the sale. However, others are missing out be not paying attention to basics. These manufacturers are tolerant of the high costs created by requisite after sale functions such as:

1. Recall

2. Disposition

3. Returns management

They do not have the vision to see that the reverse supply chain need not be an expense, but a way to create new profits by value recovery and profit creation. Those manufacturers who do not challenge the ordinarily costly expenses found in reverse product flow are failing to take money off the table.

Inefficient Reverse Logistics

Without a strategic view of the supply chain, dealing with the flow of products coming back as returns, repairs or recalls are some of the most costly processes found in the after sale supply. Companies usually regard these costs as part of the routine cost of doing business. This is shortsighted.

The Reverse Logistics Council of The USA has found that:

up to 15 percent of manufacturers expenses are spent on reverse supply chain activities

inefficient reverse supply chain management can further increase the cost

a manufacturer's profit can be affected by up to about thirty percent

Reverse supply chain costs can be managed better of that there is no doubt. In the past few years, aggressive efforts to transform forward supply succeeded by supporting new service tactics and taking advantage of new contingencies. One example, postpone and build to order. The same imaginative solutions could squeeze the costs of rebound product supply chains.

Planning strategically for reverse supply chain logistics can…

make the processes run more smoothly

be more easily managed

result in higher profits without higher costs

All at once, service response time is improved, customer satisfaction increases and brand loyalty soars - all things that stimulate returning and new customers.

Failure to Recover Value in Excess Reverse Assets

With growing demand for aftermarket services, the value and volume of products and parts found in the reverse supply chain increase proportionally and threaten the value of capital assets. These assets can be in the form of:

Unwanted product by customers

Returned/repaired inventory

Obsolete items

Unsold, new products

Sadly, the great majority of items in the reverse supply chain go un-recovered despite having significant value.

Smart manufacturers will monetize parts of aftermarket services such as product disposal previously just absorbed by the company. Customers will pay for installation fees and maintenance contracts, not as part of the initial sale, but by aftermarket specialists who will tailor programs, including reverse logistics and upgrades, into aftermarket service packages.

Takeaway
The key to keeping your customers happy is exemplary aftermarket service. Companies that are operating at top efficiency recognize the key role that reverse logistics plays in aftermarket services and will streamline, enhance and profit from them.

Related Information

Whitepaper: What is a Lifecycle Worth?

Whitepaper: Service Lifecycle Management: Benchmark Findings

How To Improve Your Reverse Logistics Service

Wed, 08 Feb 2012 06:01:00 GMT

How To Improve Your Reverse Logistics Service

Does your reverse logistics service enhance customer satisfaction, build loyalty and boast profits?

Returns cost businesses billions of dollars every year. Moreover, return policies and experience significantly affect customers’ future purchasing choices across all industries. Given the exponential increase in online consumer conversations about customer service – good or poor – it is more important than ever to ensure your reverse logistics services support customer satisfaction and loyalty.

All types of companies can benefit from increasing the efficiency of their reverse logistics processes, not just to boost customer satisfaction but also to reap cost savings, stand out from the competition and meet increasingly stringent environmental protection standards.

3 Ways to Improve Your Reverse Logistics Service

1. Integrate and streamline.

Establish a single company-wide reverse logistics center to capture functional and overhead efficiencies.

Speed up the process to get products back into the “for sale” side of the equation. This reduces or eliminates waste due to product usability problems or obsolescence.

Integrate advanced technology wherever possible. Using pre-printed shipping labels that contain detailed customer and product information makes it easier and faster for customers to return items and facilitates quicker, personalized customer notification of return receipt and disposition.

Implementing online Return Merchandise Authorization (RMA) lets customers themselves alert you they are returning items and why. Advance information about incoming returns allows warehouse efficiencies such as eliminating the need for sorting and better labor scheduling.

Continuously look for opportunities to improve every step of your system, especially the triage process. Increasing the percentage of aftermarket services options that enable you to retain or create sales minimizes your need to use the worst-case option, disposal. Even tiny details can make a big difference – one company incorporates a sensor that can indicate feasibility of repair or refurbishment if products are returned.

2. Track and analyze.

Understanding the total cost of your supply chain requires detailed knowledge about the reverse logistics portion. Better visibility into your system can identify opportunities to make aftermarket services more effective -- finding and solving problems earlier, improving customer satisfaction, and uncovering new ways to increase revenue.

Capture and track detailed information every step of the way, and carefully analyze that data. Evaluating individual customer accounts can help you reduce financial exposure when downstream distributors or retailers return unsold goods.

More and better feedback helps improve quality of products as well as service. It can also help you identify and perform repairs for resale. Ultimately, reducing reasons for returns lowers your return volume, a substantial cost savings. Some companies have even turned their reverse logistics center into a profit center.

3. Consider outsourcing.

For many companies, contracting with a Third Party Logistics (3PL) firm accelerates and enhances processes all along the reverse logistics chain. Outsourcing can provide customized aftermarket services for specialty industry sectors. Often, 3PL companies are better able to dispose of materials in compliance with existing environmental protection and sustainability regulations.

However, outsourcing is not always the best alternative. It is important to weigh the benefits versus working in tandem with your existing supply chain partners to devise and execute your own unique reverse logistics system.

Whether you choose outsourcing or retain product reverse lifecycle management in-house, a carefully designed and implemented system can establish your company’s reputation as a leader in sustainable supply chain management and enable you to realize cost savings, enhanced customer loyalty and perhaps even the potential to generate revenue from aftermarket services.

Takeaway
Reverse logistics is a necessary component of doing business, and the cost can be substantial. However, it does not have to be unavoidable. By improving efficiencies in your product lifecycle management, you can turn this “back end” of your supply chain into a profitable, marketing and environmental sustainability asset.

Related Information

Reverse Logistics Market Size & Forecast

Field Service Optimization: Oxymoron Or Major Opportunity

10 Ways to Maximize Reverse Logistics Software ROI

Are you ready for Reverse Logistics 3.0?

Service Mobility For Efficient Aftermarket Services Management

Mon, 30 Jan 2012 06:01:00 GMT

Knowledge about the location, user or a service anywhere - anytime, this is service mobility for an efficient aftermarket services management.

There are a number of organizations involved in field service trying to boost the efficiency of their workforce and reduce the costs of operations. The only way to do this is to manage the process in a better way. Service mobility applications can enhance aftmarket service operations significantly by providing you with more support including service lifecycle management.

Aftermarket consulting specialists can provide your business with a better understanding of service lifecycle management so that you can begin choosing better service supply chain solutions to help you save money. This includes looking at all of your service opportunities as a lifecycle as opposed to a single series of events. By combining all operations together, you can improve upon your costs in a more effective manner.

Service mobility has become so significant, that the IQPC has a Conference in the Middle East purely dedicated to discussing topics that revolve around how post sales service/support can be enhanced by different solutions. The conference has established that thousands of organizations around the Middle East are spending significant dollars towards scheduling, dispatching, tracking and data management simply because it is the best way to improve business.

There is a lot of service mobility technology that makes it easier to do all of the scheduling, dispatching and overall management by streamlining the process out in the field. By having mobile computing solutions in the field, it is possible to know where all workers are at any given time. This provides more methodical dispatching that can actually make call times faster and reduce fuel costs and improve the customer experinece.

Faster Service

Using GPS applications, customers receive services faster too. Installed on mobile phones, tablets and in various other products these applications can:

make it easier for the employees to get the information
management and customer service to know tracking details
inform customers when the service will arrive to them

More Efficiency

By creating better workflows, your company can actually begin to experience more efficiency in the way in which work is being done out in the field. This makes contract management:

more effective & productive
helps minimize returns & improve repair center cycle time
improves inventory turns and spare parts planning

Service mobility can facilitate a better management process. Post sales service/support may be a profit center, but it can also be a better way to offer customers or clients a way to get what they need, reducing the number of returns and repairs. Service lifecycle management improves significantly by getting to the root of the problem and offering technology to help with the logistics.

Throughout the consulting of after sales services, your company needs to understand what the desired behavior of your customers and clients. This means that if you want your customers to avoid experiencing delays to identify a problem, then aftermarket services needs a plan to deliver product support is readily available to them. By sourcing customers and clients to take part in the process, it can actually eliminate a number of problems in your plan and implementation strategies.

The service mobility technology that is available will provide effective ways for consumers to take advantage of the aftermarket services offered to them. More importantly, it can help streamline the service supply chain workflow so that the information that is critical to the success of the organization is getting into everyone’s hands sooner that will ultimately reduce costs.

More and more people are turning to implement service mobility solutions in the field because they are completely customizable. Aftermarket consulting experts are best equipped to get to the root of a company’s issues, identify the workflow and recommend proven automated devices that will improve the efficiency of aftermarket service processes and affect service lifecycle management in more positive manner.

Takeaway:
Service mobility is crucial to building service satisfaction, both with the customer and your bottom line.

Related Information

Field Service Outsourcing

Field Service Dispatch

SLA Compliance

2012 Opportunities In Aftermarket Services

Thu, 19 Jan 2012 06:01:00 GMT

What will business look like in 2012 for companies involved in Reverse Logistics and Aftermarket Services?

U.S. Federal Reserve Chairman, Ben Bernanke, pronounced that the economy showed signs of “Green Shoots” that was almost three (3) years ago. Since than, there has been much volatility in the global economy. Although the end of 2011 and the first few weeks of 2012 have showed some signs of improvement in the U.S. economy, there is still a great deal of uncertainty about the impacts of the:

European debt crisis
Arab spring in the Middle East
possibility of a recession in Asia
chances for a healthy U.S. recovery

One thing that seems to be certain is that we will continue to see volatility in the economy for some years to come. Volatility and change appear to be the new normal in the world economic landscape.

Capitalizing on Volatility

The fact of the matter is that volatility may not be such a bad thing for our industry. We can actually capitalize, if we remember that Aftermarket Service & Reverse Logistics is a counter-cyclical business that responds well to a volatile economy.

To demonstrate, let us look at a few key segments & niches that have and will continue to benefit from the current economic conditions.

Service & Support – During an economic uncertainty, new product purchases tend to remain stagnate. Companies hold onto their technology much longer.

Opportunity - Look for an increase in demand for services that extend the lifecycle of the equipment.

Returns & Liquidation – Economic volatility can cause wide discrepancies between sales forecasts and actual sales results. Excess inventory caused by this situation creates challenges for the supply chain.

Opportunity - Manufacturers and retailers will require increased assistance with managing returns and liquidating distressed inventory at discounted rates.

Asset Recovery & e-Waste - As we have observed, the value of precious metals increases during times of economic uncertainty. In addition, service & support strategies to extend the product life create a demand for spare parts and refurbished units.

Opportunity - Companies that manage Asset Recovery & e-Waste streams could be in for boom times.

5 Strategies for 2012

Companies in these market segments & niches who thrive will be those who develop and maintain a defensible market position. Here are five (5) strategies to follow to create a defensible position:

Cash Flow Management - Healthy profits are not the same as healthy cash flow. Effective management of inflows and outflows of cash is critical. While re-investment maybe necessary for future growth, it is also important not to over extend as we may be in for a long road ahead. Companies with healthy cash flows can also take advantage of the current Merger & Acquisition trends, whether they are buyers or sellers.

Metrics & Controls - It is important to be able to track service performance against customer expectations and quality targets. Management visibility of real-time service issues and escalation procedures for taking corrective action are critical toward customer satisfaction and loyalty.

Predictable & Sustainable Revenue Stream - This is a goal of any organization and dependent on a strong service-marketing program. A clearly defined value proposition, service portfolio, pricing strategy, and business development process are key ingredients to an effective marketing strategy.

Outsource to Gain Advantage – Scalability is the key to profits in the Aftermarket. Service providers are encouraged to outsourced or out-task service activities which are not strategic to the business and do not offer the ability to build economies of scale.

Implement a State of the Art Solution - Your service management infrastructure can make or break your company. It is the glue holding the business together. A state of the art system has the ability to enforce controls, effectively manage the cost of service delivery, and facilitate revenue growth.

Takeaway
Let there be no doubt that 2012 will be a challenging year for the economy in general and therefore all businesses. However, by taking a deeper look below the volatile economic surface we see real opportunities for those Reverse Logistics and Aftermarket Services firms with the insight and a plan to succeed.

Related Articles

Field Service Survival Strategies

8 Ways to a better bottom line through Reverse Life-cycle Management

10 Ways to Maximize Reverse Logistics Software ROI

Understanding Buyer Perceptions When Selling Your Business

Wed, 11 Jan 2012 06:01:00 GMT

In selling your business, creating the right buyer perceptions are key to closing the sale.

It has been a tough few business years as many companies struggled just to stay afloat, but the economic environment seems to be improving, increasing the opportunity for mergers and acquisitions. If your aftermarket services or reverse logistics business has made it through the recession, it may be time to think about selling.

As you seek potential suitors, it may not always be best to focus solely on the financial aspects of your business. The successful home seller helps potential buyers visualize themselves living there with their family. The same psychology applies when selling a business - help buyers of your business visualize themselves being successful with your company. Here are a few buyer perceptions to keep in mind that will help make your company look more attractive.

According to a Reverse Logistics Magazine article, buyers have self-motivations in purchasing a business. In the world of mergers and acquisitions, they want to believe that the business they are acquiring will:

earn them a reasonable return-on-investment
enhance their lifestyle
help them build for the future

If the prospective buyer does not understand the aftermarket services industry, you may need to give them an industry education in addition to demonstrating the financial soundness of your company. Help them dream about what they can achieve with the company as it is, and as it can be when they bring their personal creativity to it.

In addition to believing that they will be able to realize financial gains, buyers want to know that the transition process will be uncomplicated. Important details to cover in the negotiation process include the:

support of any parent company or manufacturer
likelihood that additional products will be introduced to keep the cycle moving
willingness of employees to adapt to new owners
probability that current customers will continue to purchase the post sales service/support you offer

This might call for a post acquisition integration period to help insure a smooth transition to the new owner.

Today’s global economy can allow you to offer your business to an expanded pool of potential buyers, but it may require more education on your part. Perhaps they do not understand the supply chain logistics involved in aftermarket services, so you might need to provide more detail on that end of the business.

Buyers from countries that are new to reverse logistics or aftermarket services business models might not understand how a closed loop supply chain works. If you are patient in helping them learn the details of your business, you are more likely to have a successful merger or acquisition.

If your business already has, documented management systems in place, such as ISO certification, explain how that means the company will continue to run smoothly and cost-efficiently.

Another article by Business Development Solutions discusses two risk factors that can reduce business value.

1. “Lack of Transferability” Risk - This is the belief that marketing, sales, production, or new product development all rely on one person and that area will cease to function once that individual leaves. Do your best to demonstrate that the creative talent at your company, the systems you have in place and the marketing programs will maintain customers and the sales tools you use are transferable.

2. “Excess Concentration Risk” - The risk factors that could affect the value of your business related to this risk are a reliance on:

too few big customers
one or two key employees
limited alternative vendors
a stagnant product/service offering with no new pipeline

Being able to demonstrate that all these types of risk are non-existent or minimal will enhance your ability to negotiate a successful sale.

Takeaway:
If you are thinking about taking advantage of the economic upswing by putting your aftermarket services or reverse logistics business up for sale, spend some time first learning about what buyers are looking for in the world of mergers and acquisitions. Then take an honest look at your company to determine if you have what it takes to make your business a successful acquisition target.

Want more insight into selling your aftermarket services or reverse logistics buiness or division click on the button below now!

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Impact of Cloud Computing on Reverse Logistics

Tue, 27 Dec 2011 06:01:00 GMT

Cloud computing is and will have important impacts on the reverse logistics marketplace are you ready?

Cloud computing gives companies’ access to IT-based services via the internet that include:

Infrastructure
Applications
Platforms
Business Processes

While the term "cloud computing" is relatively new, the majority of the elements of this approach have been around for a number of decades including items such as timesharing and virtual machines. The technologies of cloud computing let companies achieve higher performance by being able to respond to:

business needs
create fresh services
perform at higher levels

Nowhere is this truer than in the field of Reverse Logistics.

Close the Loop with Cloud Computing
Traditionally, supply chains were either forward moving, where the customer is the last point in the chain - the final receiver of goods or services, or they would move in reverse where the customer is the beginning point in sending goods back to the manufacture for recycling, reuse, refurbishment, remanufacturing, repair, and disposal. Cloud computing makes it possible to combine these two separate models into a single efficient closed loop supply chain model.

Share Info Across Platforms
As the smart technology integral to cloud, computing allows companies to communicate with another irrespective of their program platforms communications between buyer and seller becomes enhanced. Solutions in the cloud allow users to access and share information with no barriers.

RFID
One smart technology that is getting a lot of notice in closed loop supply chain methodology is RFID. Tracking is also simple as the RFID can transmit its location to an application in the cloud and then be found by another user that is the manufacturer puts an RFID on, say a mainframe and ships it, cloud software directly receives the information and the buyer can easily track it. No steps replace several.

Change Business Processes Easier
Cloud computing assures the supply chain business operating models of today real-time, cross-community transparency. Seamlessly processes operate with efficacy and solo or group decisions are faster as the information acted on is from a single source.

Added to this is the benefit of lower costs for shared services and a supply chain community empowered to shrink or grow and still meet the needs of the community it serves. The same expansion and contraction of the community being served can change too, given the cloud-based ability to change the shape of business processes that support goods, partners and locations.

The Time Is Now
Supply chain executives may question if the timing is right for cloud-based applications for managing the supply chain. The answer is yes. Vertical integration of supply changes are morphing, from control of a single company to shared control with suppliers, distributors, third-party manufacturers and even the end-user. Apple is the one of the masters of the game, suppliers all over the world, manufacturing in Asia, distribution on every continent, retail sales in almost every locale and reverse logistics beginning with the customer.

To manage the process of transporting goods and services across national and corporate borders needs multi-company, multinational communication and cooperation. The necessary solution cloud computing brings to the system.

Cloud computing services have made tremendous inroads to data security, redundancy, cross-platform integration, smart technology and lower cost. Predictions by leaders such as SAP are that supply chain management systems will be entrenched as the "best practice" within the decade. Their reasoning is that real-time data is more actionable with a more rapid response time, is cheaper and flexible enough to meet rapid changes in the market.

Takeaway
The impact on reverse logistics and aftermarket services will be profound and game changing. If you have not started to get the information, you need to know how this technology will improve your business do not be left behind.

Sell Your Business Now?

Mon, 19 Dec 2011 06:01:00 GMT

The economic climate may still be unpredictable, but that does not mean you should not think about selling your reverse logistics or aftermarket services business. For many sectors, economic, tax, accounting and general industry factors have converged to create an attractive seller’s market.

The timing may be right to sell to an entrepreneur, or your company may be in proper position to take advantage of a merger or acquisition.

The M&A marketplace previously stalled is now picking up steam. And, while private equity is still driving the bus, corporate buyers are more prevalent now, according to MERGERS & ACQUISTIONS online at http://www.themiddlemarket.com/.

There Are Plenty Of Buyers
Downsized corporate executives and mid-level managers are looking for personal opportunities where they can better control their future. Moreover, many left former jobs with sizeable severance packages. Buying an established business now looks good to them.

Publicly held companies with high valuations are using their access to cheaper capital to explore mergers and acquisitions, as a means to reach the level of earnings expected by investors. They can leverage acquired cost efficiencies to offer better pricing, to improve competitiveness. Consolidation bodes well for mid-size companies and those that offer “niche” benefits to buyers.

Mergers and acquisitions enable broader and/or deeper market penetration, product range, or other capabilities. Buyers are looking for complementary or new expertise to support vertical or horizontal integration – an increased business base that will enable them to take advantage of global economic revitalization, whenever it arrives.

These sectors are prime M&A targets:

Information Technology
E-commerce
Marketing and PR
Manufacturing
Engineering
Security
Insurance
Banking
Legal
Accountancy

Capital Gains Are Lower Than Ever
Despite election year rhetoric, after 2012 capital gains savings could become less – perhaps significantly less -- advantageous. Right now, both sellers and buyers enjoy incentives. And, for sellers, tax savings combined with your business sales price can represent very satisfying “total sale” revenue.

There are Potential Financing-Related Advantages
Outside financing is possible but still challenging. Regardless, you may find it more profitable to self-finance. Buyers might be willing to pay higher interest than their bank would charge – assuming it would lend them the funds -- so you could supplement your sales price with substantial additional interest income.

A seller’s willingness to finance the deal also demonstrates your confidence in the continued “performance value” of the company.

Healthy, Profitable Businesses Are Always In Demand
There may be many businesses for sale right now, but good ones that have demonstrable value are still limited in number. Favorable cash flow, a well-received product line, strong market presence and a good brand image are all sales-friendly characteristics that could position your company well in the mergers and acquisitions marketplace.

Even weakening or unprofitable businesses can be attractive for M&A if they offer other special features such as R&D talent, unique access to distribution channels, etc.

Maybe It Is Just Time
There comes a time in the life of every company when it makes sense to sell. If your growth has reached that point, a merger or acquisition may be the ideal next step.

Alternatively, negative factors may be building. You want to sell while your business is still doing pretty well. So if your markets are weakening or your market share declining, or if you are facing an increased need for capital or other significant changes to keep your company competitive, now may be a good time to sell.

Takeaway
The mergers and acquisitions market is all about finding a good strategic fit. Consolidators are looking to build overall corporate strength, and your reverse logistics or aftermarket services business may be the puzzle piece they need.

Would selling now do more for you financially than not selling?

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5 Merger Acquistion Tips - Download Free

Mergers & Acquisitions 5 Strategic Planning Tips

Sun, 27 Nov 2011 06:01:00 GMT

Thinking about mergers & acquisitions, then you will want to know that the road to M&A success is a dangerous one fraught with risk. Consider a recent KMPG study, found that over 85 percent of mergers and acquisitions fail. Another study, by A.T. Kearney, found that the total return to shareholders on 115 global M&A transactions was negative 58% of the time.

These are sobering numbers to any chief executive thinking about venturing into a merger or acquisition for their firm. Companies that fail to plan properly for their mergers and acquisitions are surely doomed to repeat the sins of their corporate brethren.

Enter the absolute need for strategic planning. No company would enter into a merger and acquisition transaction without planning, but by paying heed to these five tips, companies can succeed as one strong organization.

1. Define measurable, quantifiable key outcomes. The planning process needs to address several things:

what defines success in the merge
whether or not it is a merger or acquisition
how the new company will add to the current company’s objectives
what the overlap is, and how to integrate the new company

2. Engage in structured planning.
Well-defined planning and execution of mergers and acquisitions is extremely important when it comes to preventing failures. Address issues like unions, pay scales, benefit plans, technology, sales, reporting, marketing, and the legal implications of the merger or acquisition.

3. Stay involved in the core business.
During a merger or acquisition, it is easy to get caught up in the details of the new company. Do not forget about the core business, the one that is enabling you to merge or acquire this new business.

4. Keep employees in the loop.
During a merger or acquisition, employees will worry about the fates of their own jobs. Keep them apprised of changes, and make sure they know that their work is valued. If the company is acquiring another, it is important to try to keep as many of the original company’s employees as possible to boost morale. Also, keep in mind that managers may choose to defect out of fear of losing their jobs. To keep the best talent, reassure them that they will not be laid off after the merger or acquisition – and then follow through with that promise.

5. Transition the new company’s strengths properly.
A huge reason for failure is that the purchasing company does not properly integrate the new company’s strengths into the business, nor does it fully fold the new company into the brand. Transition early and carefully, and plan how each portion of the new company will fit into the purchasing company. In a merger, match the core competencies of each company to bring together a solid, strong unit that generates profit for everyone.

Takeaway
The bottom line is to never neglect strategic planning in mergers and acquisitions and remain attuned to all facets of both businesses.

Like more insights into the strategic planning process that can help your firm navigate the treacherous business transactions of mergers and acquisitions, contact Michael Blumberg, CMC at 855-643-9060 Ext 703.

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Field Service Survival Strategies

Wed, 16 Nov 2011 13:17:00 GMT

Seven strategies for surviving the cloud with a cloud computing survival guide for Field Service Organizations.

Cloud Computing represents one of the most significant trends influencing the global economy today. It is impossible to open a trade publication or magazine without reading an article extolling the virtues of Cloud Computing in its various forms:

Software as a Service (SaaS)
Infrastructure as a Service (IaaS)
Platform as a Service (PaaS)

Cloud Computing is also facilitating the deployment of intelligent, instrumented, and connected technology. This “Smart Technology” forms the basis of the infrastructure that operates the world economies and a wide array of business processes industrial & consumer segments ranging from banking, to building, to cities, to energy, to education, transportation, and even fast food.

Furthermore, miniaturization of digital computing devices makes it possible for anyone, from anywhere in the world, to plug into the cloud, and conduct transactions anytime they want.

Benefits of the Cloud Computing Model

lower cost of ownership
reduced carbon footprint
ease of implementation
transferring risk from end-user to technology provider

These technology trends are a double edged sword for Hardware Maintenance companies and Field Service Organizations (FSOs). On one hand, Cloud provides access to affordable, state of the art and easy to implement solutions (e.g., Field Service Mobility, Remote Diagnostics, Service Parts Optimization, and Service-CRM). This of course improves the overall productivity and efficiency of Service Logistics and Field Service operations. Think faster and cheaper service!

Alternatively, this same technology is lowering the demand for field service events in general. Not only can Cloud and Smart technology be supported remotely but virtualization and miniaturization are causing the installed base of hardware to shrink, both literally and figuratively, thus decreasing installed base density and the overall demand for field service.
In order to achieve predictable and sustainable revenue growth and profit margin, we believe Field Service Organizations (FSOs) can benefit from following our Seven (7) Strategies for Surviving the Cloud.

Field Service Organizations Surviving the Cloud

1. Strategically Manage your Installed Base
Installed base density is the ultimate driver of profitability within a hardware maintenance environment. Comprehensive knowledge of service demand characteristics and Key Performance Indicators (KPIs) combined with the ability to plan capacity and influence utilization of Field Service resources is critical to achieving profit target and revenue objectives.

2. Find Synergistic Market Opportunities
One of the interesting things about Smart Technology is that it creates a proliferation of connected (i.e., networked) devices and systems that contain commercial off the shelf electronic components and sub-assemblies (e.g., Printed Circuit Boards, CPUs, Monitors, Key Boards, Storage, etc.).

This opens up new market opportunities for hardware maintenance providers and FSOs. A perfect example is Smart Grid Technology that predicts and intelligently responds to the behavior and actions of all electric power users connected to it in order to deliver reliable, economic, and sustainable electricity services. The same service delivery processes and systems that support an enterprise IT network can also be deployed to support the Smart Grid.

3. Re-engineer Back end Service Delivery Model
As the complexity of the serviceable installed base changes in the new cloud environment, so to does the service delivery model. FSOs and Hardware Maintenance companies must be lean and nimble when responding to the new service requirements of the Cloud.

In addition, the proliferation of mobile devices connected to the Cloud is creating the need for new services like asset management and reverse logistics. Re-engineering strategies might involve the transition to a variable work force, adoption of optimized approaches to scheduling & dispatching Field Service Engineers, outsourcing or out-tasking of non-core, service delivery functions, and/or the development of new service capabilities.

4. Implement State of the Art Service Management Systems
Most agree that FSOs need to be lean and mean. Cloud based Service Management applications have tremendous value and benefits from a cost of ownership perspective. Not only do they enable real-time service optimization but they also can be integrated with Smart Technologies to create robust, end-to-end service lifecycle management solutions and new service offerings like Remote Monitoring & Diagnostics and Business Intelligence (BI) & Analytics.

5. Monetize back-end service offerings
Companies who operate hardware maintenance as a profit center are obliged to find new sources of revenue to offset the change in demand. This can be achieved by monetizing re-engineered back—end service capabilities. For example, faster response time brought about through the implementation of optimized scheduling could be monetized through premium priced Service Level Agreements.

Performance Metrics related to Mean-Time-Between-Failure, (MTBF) and number service incidents per customer locations can be mined for business intelligence, packaged, and marketed to end-users as a tool for improving the productivity and efficiency of their own operations.

6. Service portfolio targeted toward new Cloud environment
A logical progression for many FSOs, particularly those involved in IT Services, is to become Cloud Service providers themselves by offering Data Center Hosting/Private Cloud platforms, and Managed Services contracts for devices (e.g., printers, scanners, workstations, etc.) connected to the Cloud. Cloud based Service Management solutions also enable new revenue generating service offerings such a Remote Monitoring & Diagnostics and Business Intelligence.

7. Leverage Partnerships & Alliances
There are so many different options available to re-engineer and/or offer new services offerings. It is impossible for one company to do it all. Partnerships and alliances are the key to tapping new sources of profitable revenue and improving the cost of service delivery.

In summary, while there is lot of excitement about the economic benefits and technical advantages of Cloud Computing, we should not overlook the fact that these opportunities present major challenges to companies involved in Hardware Maintenance by potentially threatening their viability.

Takeaway
However, there is a positive aspect within the Cloud for companies who follow the strategies outlined above. It is not necessary to pursue all. By simply implementing one or two of these initiatives, a hardware maintenance company can stabilize their business, if on a downward trend, and produce a predictable and sustainable (and growing) income stream if already stable.

Like more insights into the threats, benefits and opportunities of cloud computing for you aftermarket services business contact Michael Blumberg at 1-855-643-9060 Ext 703.

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10 Ways to Maximize Reverse Logistics Software ROI

Aftermarket Service as a profit center-Part IV: Technology is Key

10 Ways to Maximize Reverse Logistics Software ROI

Wed, 05 Oct 2011 14:33:00 GMT

Every year, Manufacturers and 3^rd Party Service Providers invest billions of dollars in software and services to automate and improve their Aftermarket Service and Reverse Logistics operations. Despite major advancements in software functionality, there is a general sense that these investments have not produced the level of benefits that were promised by the vendor.

According to 2010 market study, nearly two-thirds (63%) of respondents surveyed indicated that their system implementations have failed to realize the benefits that were anticipated. However, not every implementation ends in failure. Some can be very successful.

In light of these issues, we thought it would be very useful to compile a list of the top 10 actions that a company can take to avoid failure and ensure a high Return on Investment (ROI) from implementation of new Aftermarket Service & Reverse Logistics Management systems. Here they are…

10 Ways to Maximize Reverse Logistics Software ROI

Develop a Clear Strategy The most important way to ensure success is develop a very clear and precise strategy with respect to how your company performs and manages Aftermarket Service & Reverse Logistics. The strategy must be market driven and anticipate the future systemic & business requirements of your company.
Integrate Afterrmarket Service (AMS) & Reverse Logistics (RL) AMS & RL activities cut across multiple functions within a typical business from CRM, to Supply Chain, to ERP. As such, the the quality of AMS and RL systems can impact these functional areas and vice versa.
Understand Current Performance Prior to embarking on the deployment of a new system, it is important to get a baseline measurement of Key Performance Indicators (KPIs) and benchmarks. This baseline will likely identify gaps and areas for improvement as well as provide a basis for measuring the extent of the improvement.
Find the Best Toolset There are a plethora of systems on the market and even more case stories about successful implementations. Beware, one size does not fit all! Your processes and procedures are unique to your business. Don’t attempt to force fit a solution that was designed for someone else.
Consider Enterprise, Supplier, & Customer Interfaces Make sure that you consider the data points and systemic interfaces that are needed to communicate with the rest of your enterprise, suppliers, and customers. The ability of your AMS/RL systems to work collaboratively and in real-time is critical to the productivity, effeciency, and quality of service operations.
Obtain Input from Stake-Holders Take the perspectives of all corporate stake-holders (e.g., employees, customers, suppliers, other departments) into account when designing, selecting, and implementing your new solution. This will ensure that you have a solution which meets everyone’s needs.
Business Solution Not an IT Project AMS/RL represents the next frontier for Manufacturers and Service Providers in terms of generating new streams of profitable revenue. A good AMS/RL software platform can provide the backbone for a very lucrative business. However, success is predicated on designing the solution to meet the needs of the business and not vice versa.
Define Metrics & Objectives As the old saying goes, “that which does not get measured, does not get improved”. Make sure you have goals and objectives that are measurable and acheivable. That way you can ensure incremental improvements and long term gains.
Systemic Improvement Not a One Time Event AMS/RL are very dynamic businesses. Service requirements and business practices continue to refine and evolve. As such, the implementation of new functionality should not be viewed as a one time event. Make sure you have a good road map and a broad based planning perspective and time horizion.
Secure Top Down Leadership & Employee Buy-In Getting top down leadership to support a new business initiative is critical to obtaining funding and ensuring long term committment. However, employees who don’t embace the new way of doing business can sabatoge the implementation and cause damage. It is important to involve operational level employees in the process of system requirements definition and selection process. This will provide them with a sense of pride and ownership in the new system.

Takeaway:
Avoid dissapointment in the level of benefits promised by your reverse logistics or aftermarket service software vendor. As always success depends upon proper implementation. Insure a maximum ROI for your firm by following these 10 steps for a successful implementation of your reverse logistics or aftermarket service software. To learn more how you can avoid failure and achieve a maximum ROI, please feel free to contact us at (215) 643-9060.

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Aftermarket Services as a Profit Center - Part IV Technology is Key

Social Responsibility comes to Congress

Sat, 13 Aug 2011 23:49:00 GMT

Amidst the heated political debate to raise the U.S. Debt Ceiling, Congress actually had time to focus on issues of Social Responsibility. On June 22, 2011, The Responsible Electronics Recycling Act of 2011 was submitted and filed by bi-partisan sponsorship in both the House and Senate. The bill would make it illegal to send toxic e-waste to developing nations. HR 2284 was introduced in the House by Representatives – Gene Green (TX-D), Mike Thompson (CA-D), Steve LaTourette (OH-R), and Lee Terry (NE-R), and S1270, was introduced on in the Senate by Senators Sheldon Whitehouse (D-RI), Sherrod Brown (D-OH) and Lisa Murkowski (R-AK). A summary version of this bill can be found at http://www.electronicstakeback.com/wp-content/uploads/Summary-HR2284.pdf

This bill restricts the export of electronics containing certain toxic chemicals to developing countries. It would still allow exports of tested and working parts and products, as well as products or components under warranty, exported by the manufacturers for warranty repairs, and products subject to recalls. According to the U.S. Environmental Protection Agency (EPA), the U.S. generated about 2.4 million tons of e-waste in 2010. Many industry observers believe this volume will continue to grow with the proliferation of electronic devices. The bill is supported by environmental groups as well as manufacturers and retailers (Dell, HP, Samsung, Apple, and Best Buy), all of which already have policies that prohibit the export of e-waste to developing nations.

In my humble opinion, this bill does a good job at defining what constitutes electronic waste. It provides a very broad definition, broader than WEEE/RoHS or any state legislation that currently exists. Furthermore, the bill will create the first national policy of its kind. This is something we desperately need. A national policy will also help to eliminate the cost and administrative burden associated with individual state regulations.

One of the limitations of this legislation is that it establishes compliance regulations which only address the of chain of custody from the point of shipment to another country to the point of receipt. Unfortunately, the bill does not address compliance regulations for eWaste processed within the U.S. At face value, It seems that Congress is more concerned with protecting other countries from destructive forces than protecting our own citizens and environment.

One of the most promising aspects of the bill, from a jobs creation and economic stimulus perspective, is that it calls for grants to fund research into the Recycling of Rare Earth Minerals found in e-Waste. While this mandate is quite broad, the funding would cover such things as logistics, reverse supply chain, and separation, etc. Innovation is always a good thing and there are certainly a lot of opportunities to improve the productivity, efficiency, and quality of recycling operations, both on a macro and micro level.

Although this legislation may appear to be very promising toward establishing a national policy and reviving the economy, the real question remains whether Congress will ratify such a bill given the economic issues and fiscal policies facing this country. It is quite possible this bill may die in committee. Status of S1270: referred to Senate Committee on Environment and Public Works on 6/23/2011. Status of HR 2284 : referred to the House Subcommittee on Energy and Environment on 6/29/2011.

In summary, this bill represents a good first step for our country's Electronic Waste Policy. While I am in favor of revisions and letting the political process take its course, my biggest concern is the bill will go nowhere in congress. If you feel as strongly about it as I do, please contact your Representatives and Senators to let them know that they need to pass this legislation. Thanks!

Aftermarket Service as a profit center-Part IV: Technology is Key

Wed, 27 Jul 2011 19:50:00 GMT

In this final blog post on the subject of After Market Service as a profit center, I will address the strategic role and value of technology. While it's true that all enterprises rely on technology in some way or another, companies In most industries utilize technology primarily as a mechanism for controlling the cost of revenue by enabling employees to work more efficiently or productively. These same benefits exist within the After Market Service industry. However, technology has the added benefit of enabling After Market Service providers to generate new, profitable streams of revenue.

Here are just a few examples of how companies can leverage technology to generate incremental and profitable revenue streams.

1. Service Level Agreements (SLAs): Through the implementation of Service Parts Optimization and Dynamic Scheduling solutions, companies can do a better job at creating, offering, and managing tighter SLAs. Market Research has shown that customers are willing to pay a premium for faster SLA commitments. Advanced technology makes this possible.

2. New Service Offerings: Applications like Mobility, Remote Monitoring and Knowledge Management tools not only improve the productivity of service delivery but also enable new premium priced service offerings like remote diagnostics and telephone technical support.

3. Creation of new service lines of business: Completely new lines of service business can be built with the help of advanced technology. For example, Service Parts Optimization tools have enabled a few service providers to build profitable Service Parts Logistics businesses. We have also seen Field Service Companies expand into Depot Repair & Reverse Logistics and vice versa with help of enterprise solutions.

4. Enhanced Revenue & Profit opportunities: Mobility solutions make field service personnel more productive and efficient which in turn helps drive revenue and profits. In addition, these tools can be programmed with workflow rules that enable a field worker to double as a front line sales person thus generating additional revenue with little added costs. Furthermore, data collected and monitored by enterprise systems and planning systems can help companies make better decisions about pricing thus generating more sales and profits.

I hope these four brief examples have demonstrated the strategic role and value of technology toward an Aftermarket Service company. To recap, technology can be used both as an operational tool for managing/controlling the cost of revenue as well as a strategic mechanism for creating new profitable sources of revenue. This holistic approach of leveraging technology to improve service profits is also known as Service Lifecycle Management (SLM). Companies who have adopted a SLM mindset and technology delivery platform have been able to achieve substantial improvements in service revenue and profitability, as much 30% to 50% within 24 to 36 months of adoption. You can learn more about SLM by downloading Part I of our white paper entitled: Service Lifecycle Management(SLM): The New Competitive Frontier.

Thank you very much for reading my 4-part blog series on managing After Market Service as a profit center. I hope you found it informative. I am interested in learning about any success you had in implementing the concepts outlined in this series. I will also be more than happy to field any questions. Please feel free to post you comments on this blog site or drop me a note at michaelb@blumberg-advisor.com.

Aftermarket Service as a profit center-Part III: The Cost of Revenue

Mon, 13 Jun 2011 14:36:00 GMT

In my last blog post, I spoke about how to generate revenue from the Aftermarket by monetizing the value of the serviceable installed base. Incidentally, the installed base is the key to revenue and profits in any type of technology enabled service business. The easiest way to increase profits is find more service to sell into the installed. Just look at the proliferation of mobile applications. Suppliers to this industry realize that they have an installed base of mobile device uses and have found ways to monetize this value by selling more applications.

As you may recall, I pointed out that ability to monetize the value of the installed base and generate revenue is the first building block to operating a profitable Aftermarket Service operation. The second building block toward a profitable operation is to be able to manage the cost of service revenue. Simply put, profits are a function of revenue less the cost of the revenue. To be profitable at aftermarket service, you not only need to know how to generate revenue but you also need to manage the costs so that they are less than the revenue received. This is a very simple advice, I know but not everyone understands the keys to managing the cost of revenue.

What are the keys to managing the cost of revenue in an Aftermarket Service organization? The common answer given by many Service Managers and Executives is “people, process, and technology”. However, I have a different point of view. I believe the keys are data, process, and technology. Do not get me wrong, I am not down playing the role of people in a Service organization. People are important to any venture or mission, whether it is an Aftermarket Service operation, manufacturing company, fast food restaurant, or non-profit institution. The characteristics found within a skilled labor force and strong leadership team benefit every type of organization. However, data, process, and technology allow ordinary people to achieve extra-ordinary results within a service organization.

Among the three components listed above, you probably understand the role and value of process and technology in managing the cost of revenue. Process refers to the procedures and controls in place to deliver services on a cost effective basis. Technology enables processes to be automated and streamlined, further improving the ability to manage the cost of revenue. Data provides the mechanism by which a service operation can ensure that resources are available and service delivered in a timely manner and at the quality level desired. Furthermore, data enables a service organization to analyze and improve service processes, and forecast resource requirements so they are available when needed.

Data, process, and technology are three legs of the same stool. To capture and leverage data you must have good processes and technology in place. You must be able to measure the effectiveness of processes by capturing data about the process. You also must have technology in place to collect, store, manage, and manipulate the data so that you can optimize service performance. All three must work in tandem in order for a service organization to effectively manage the cost of revenue and be profitable. This is why there is such a high focus on best practices (process), benchmarks (data), and technology within the Aftermarket Service industry.

To achieve best in class performance, a service organization must take a holistic approach to managing the cost of service revenue. Rather than manage each component separately, a service organization must fully understand the relationships to one another. With this holistic approach in mind, we can better understand the cost drivers and trade-offs that exist between the various components. This will enable us to start making incremental and significant improvements in our cost structure. More importantly, we now have the framework in place for developing new service offerings and profitable, revenue generating opportunities which we will discuss in our next blog post.

Aftermarket Service as a profit center-Part II: Service Revenue

Wed, 11 May 2011 19:32:00 GMT

In order to operate as a Aftermarket Service as a profit center, a company must be able to generate income. This requires that a service company identify their target market and identify sources of revenue. In essence, we need to define the serviceable installed base. To this, we must be able to answer the following questions:

What equipment are we going to service?
Where is it located? Who owns it?
How many units are in the population?
Who is the customer for our service? How many customers are there? Where are they located?
How many customers will buy our service? How many units will that represent?

Market data obtained from primary or secondary market research will provide the answers to this information.

Once we understand the size of our addressable market, we can find ways to monetize the value of the installed base. This is the key to generating a predictable and sustainable revenue stream. Service revenue is a function of the demand characteristics for service & support. There are several ways to forecast service revenue ranging from back of envelope approaches to very sophisticated and precise methodologies. A significant portion of service revenue comes from the provision of basic maintenance and repair services including replacement (spare) parts. At the most basic level, revenue is determined by adding a profit mark-up to the fully loaded cost of service delivery. The fully loaded cost of service delivery is a function of demand characteristics and resources required to support these characteristics.

Basic service will typically account for approximately 5-10% of the total value of the installed base. With value defined as the size of the installed base multiplied by the average purchase price of units of the installed base. This has become a rule of thumb since conventional wisdom suggests that a customer will spend about 5%-10% of annual purchase price on basic maintenance & repair services. The percentage can be much higher when dealing with complex, capital-intensive equipment like an MRI machine, locomotive, mainframe computer, etc.

However, most customers require more services than just basis maintenance and repair such as training, configuration management, technical support, remote maintenance, advanced exchange, spare parts, etc. These activities are called value-added services. Faster turnaround time, guaranteed uptime, or longer service hours of coverage are also examples of value added services. The revenue from basic and value added services can be significant. In fact, market research has shown that revenue from basic and value added services can represent as much as 10 to 30 times the original purchase price of their equipment per year.

To calculate the revenue stream possible from value-added services, one either has to charge an uplift fee for the value-added service or research customers’price sensitivity to paying a premium over the basic service fee for the value-added coverage. This is how value based billing is achieved. One way of determining what the market will bear is to estimate how much it will cost the customer in lost revenue or lost productivity for every hour of downtime/ lack of service. This approach will help you determine if your value-based price is reasonable.

So far, I have provided you with basic knowledge of how to determine the revenue potential. Ultimately, you will need to conduct your own research and analysis or hire a 3^rd Party to assist you. You will also have to make some assumptions about your target market or obtain real data as to how much of the service potential is actually achievable in year 1, 2, 3 and so on. Once you complete this exercise, you will now have accomplished the first step to building a business case pro-forma and building a high performing profit center.

In my next series of blog posts, I will cover the remaining building blocks involved in running a profit center. Stay tuned.

To learn more about Blumberg Advisory Group’s experience in building profit centers and creating sustainable and predictable income streams for our client, please visit our website (www.blumberg-advisor.com) or email us at info@blumberg-advisor.com

Aftermarket Service as a profit center-Part I

Sun, 10 Apr 2011 14:33:00 GMT

It still surprises me that there are companies who have not made the transition to service as a profit center. I find this even more surprising given the fact that there are so many 3rd Party Service providers, in just about every industry, who operate service as a profit center and compete with OEM cost center operations. Ultimately, I believe the transition to a profit center depends on a company's philosophy and perspective toward service.

Some companies maintain a philosophy that service should operate as cost center. This philosophy is often driven from the Board down and institutionalized through-out the organization. A "service is free" philosophy typically exists with companies who sell highly reliable and durable products that have a long life-cycle. It is not unusual to see a life-time warranty or 20-30 year warranty in this instance. For example, my luggage comes with lifetime warranty. I never have to pay for repairs. And believe me, my luggage takes a beating. We also observe this cost center mentality among OEMs who obtain a great deal of revenue from the sale of consumables which run through their machines. Examples include printing presses and certain types of medical devices. In these situations, the manufacturer makes its profits on the sale of consumables and views service as a cost of doing business.

In either type of service environment, a change in perspective is needed before a company can change its philosophy toward operating service as a profit centre. What perspective am I referring to? The perspective that the OEM's installed base represents an asset that can generate a profitable revenue stream. Those companies who treat service operations as a cost centre tend to view product support as a liability. As such, their desire is to mitigate risk and minimize liabilities. This mentality is a limiting factor toward making improvements in service productivity & efficiency, and may even have a limiting affect on the customer experience, and ultimately product sales. In contrast, OEMs who have the perspective that their installed base can generate a profitable revenue stream are more likely to view service strategically and get the right leadership, KPIs, systems, tactics, and processes in place to ensure consistent and predictable results.

The current economy is forcing more and more companies to view service from this new perspective. However, a strategic perspective is required. The challenge for many companies who want to become profit centers is that they view the processes very tactically. Instead of understanding their market, customer requirements, and systemic investments, they want to jump right toward setting up a P & L and start charging for services. Without the strategic perspective, a company will not invest properly and could make serious misteps which damage customer relationship and loyalty for the company's core products.

A great deal of strategic work is required to move a cost center to a profit center. Since the 1980s my firm has also been actively involved in consulting to OEMs who want to mange their Aftermarket Service operations as a strategic profit center. I will provide more insight into the basic building blocks necessary for operating Service profit center business in my next blog post. In the meantime, if you'd like to learn more about transitioning your service operation into a profit center or using service strategically to increase profits, contact me at michaelb@blumberg-advisor.com

Horses for courses when it comes to Reverse Logistics software

Thu, 03 Mar 2011 23:17:00 GMT

As part of our ongoing efforts to evaluate the state of the art of Reverse Logistics Management Systems, we have identified over a dozen software vendors who offer applications that can automate some or all aspects of a Reverse Logistics or Aftermarket Service operation. The market can support so many alternative solutions because there is no such thing as a “one size fits all” solution. At least that is our professional opinion. It’s “horses for courses” when it comes to vendor software selection. In other words, what is best from one company might not be suitable for another. That is why we created a new Best-In-Class IT Certification program.

Our primary objective in establishing this program is to help end-users shorten the time and effort involved in identifying software vendors who best meet their needs. Our certification process involves a rigorous evaluation of each vendor’s IT software platform and considers several critical factors including but not limited to:

Breadth and depth of application feature/functionality
Flexibility, scalability, and configurability of the solution
Ability of the solution to resolve problems inherent to reverse logistics & aftermarket service environments
Impact on key performance indicators (KPIs) and financial & operating metrics
Alignment with current and emerging market needs & requirements
Ability to positive influence the customer experience and drive service innovation

Kewill Inc. is one of the first vendors to put their Reverse Logistics application through our process and receive best in class certification. Our comprehensive analysis found that the Kewill Reverse Logistics solution sets the industry standard for RLM by addressing key issues related to multi-process and multi-party collaboration and orchestration, visibility through the entire service network, product disposition awareness, and scalability of operations.

The Certification Program essentially provides a benchmark assessment of system feature- functionality against The Certification Program essentially provides a benchmark assessment of system feature- functionality against the state of the art. As such, OEMs, Retailers and 3PSPs can also undergo Blumberg’s evaluation process to determine the health or level of alignment of their current IT environment with industry best practices. The certification process is open to any company that wants an independent and objective assessment of their Reverse Logistics/Aftermarket Service IT Platform. Our vision is that the certification program will serve as the basis for creating a database of best practices in terms of software feature sets and vendor capabilities. We would love to get your feedback on this idea and encourage you to post your comments on our blog. We also encourage you to run your system through our certification process.

To request an evaluation of your IT platform. click here.

2010 – The Year in Review for Reverse Logistics

Fri, 17 Dec 2010 22:44:00 GMT

As this year winds down, I’d like to thank the readers of my blog for their continued support and interest. I’d also like to use this last blog post of 2010 as an opportunity to review key industry highlights from the past year. These include but are not limited to:

1. Deployment of advanced technology to manage reverse logistics operations

Earlier this year, I predicted that 2010 would become the year of the Reverse Logistics Management System. Indeed, there is a growing interest among OEMs, Retailers, and 3PSPs in streamlining and automating key Reverse Logistics processes and Post-Sales Service functions. Increased visibility, end to end integration, and supply chain optimization have been some of the key benefits that companies have obtained through upgrading, enhancing, or replacing their legacy systems with state of the art solutions from the software vendor community. Our firm has benchmarked all the major software vendors in this space and has developed some very good insight and opinions as to the unique capabilities of each vendor which we will be happy to discuss off line.

2. Uptick in Mergers & Acquisitions

2010 has seen a number of acquisitions by 3PSPs to quickly gain market share, step function increase in profits, and consolidate the industry. Moduslink’s acquisition of Tech For Less, Arrow’s acquisition of Converge & Intechra, Genco’s merger with ATC, Decision One’s acquisition of Anacomp MVS and subsequent acquisition by Glodyne, and the recent announcement by Gilde to acquire Teleplan are but a few examples of acquisitive growth strategies. It is gradually becoming a seller’s market. As such, many entrepreneurs now view this as good a time as any to pursue an exit strategy or a liquidity event. Blumberg Advisory Group is actively involved in several buy side and sell side engagements and would be happy to discuss opportunities that may fit your company.

3. Emergence of new players with deep pockets

The realization that Reverse Logistics and Post Sales/Aftermarket Service can operate as a strategic profit center and/or profitable line of business has resulted in the emergence of new players with deep pockets funded by either company coffers or private equity backed ventures. Avnet, Arrow, and Ryder are examples of multibillion dollar, publically held companies who have entered the market through acquisitive and organic growth. Aftermarket and Post-Sales Service businesses has also caught the attention of India based Business Process Outsourcing companies who desire feet on the street capabilities as an extension of their traditional businesses. Recurring revenue streams and the asset light nature of 3rd Party Reverse Logistics Providers also make this space very attractive to Private Equity Groups.

4. OEM policies to control the Aftermarket

The long term nature of this current recession has had a negative impact on new product sales and profits. To offset these difficulties, OEMs have turned to their installed service base as a source of profitable revenue. To protect this base, some OEMs have such as HP and Oracle/Sun Microsystems have created a number of policies which limit competition by multivendor, 3rd Party repair vendors. During the late 1980’s-earlier 1990s, there were several legal battles, (one even reached the U.S. Supreme Court) where OEMS were in violation of Federal Anti-trust laws because they erected monopolistic and anti-competitive practices against Independent Service Organizations. This begs the question.. will history repeat itself?

5. Demand for new Reverse Logistics & Post Service Support models

Companies are continuously looking for innovative ways to take costs out of the reverse logistics supply chain while improving the overall customer experience and level of support offered. 3rd Party Outsourcing, Remote Diagnostics, Self Service repair & return models, process improvements, and automation have been some of the ways we have helped industry participants to achieve these goals.

This list is by no means exhaustive. It merely represents the top 5 issues that my firm has been mostly actively engaged in. I encourage you to provide you thoughts and add to the list where applicable. Stay tuned for next year’s 1st blog post where I will provide my predictions for 2011.

Season’s Greetings and Happy New Year!!

8 Ways to a better bottom line through Reverse Life-cycle Management

Thu, 02 Sep 2010 15:31:00 GMT

Reverse Lifecycle Management (RLM) provides integrated, end-to-end functionality for the management and control and execution of reverse logistics transactions. The feature functionality in an RLM system enables the automation of key processes and tracking of critical data related to returns, warranty, inventory, transportation, shop floor control, etc. As the acronym implies, RLM supports the lifecycle of a reverse logistics transaction

An Reverse Logistics operartion can realize a number of quantifiable benefits by implementing an RLM solution. These benefits include but are not limited to:

Cost reduction through better utilization and planning of assets and resources. This is brought about through visibility and planning tools.
Administration consolidation through reduction of touch points which can be achieved through the integration capabilities, business rule work flows, and standardized management reports found within an RLM solution.
Protected revenue and income recognized when companies better understand how much revenue and income associated with Aftermarket Service is at risk in the RLSC. This is achieved through the implementation of better controls found within end-to-end functionality and continuous monitoring of RL events (e.g., recall, returns, and warranty service).
Liability protection: Many companies in diverse industries are susceptible and exposed to legal and regulatory action due to environmental and governmental regulations. The tracking and tracing features within an RLM provide up-to-date, real time information on the disposition of every item within the RLSC.
Resource optimization: Inventory, transportation assets, employee allocation, and other resources are wasted on improper RL practices. Through business rules and better data, an RLM helps to conserve and manage a company’s resources.
Productivity and efficiency gains: Poor RL processes take too much time resulting in poor customer satisfaction and wasted money. RLM streamlines and optimizes RL process time through standardized processes and procedures.
Customer experience improvement: OEMs, 3PLs, Carriers, and Retailers can dramatically improve customer satisfaction through the implementation of self monitoring reverse logistics processes and systems. Refined business practices, such as issuing proper credit for returns, fast turnaround on sending products back to customers, balanced books, and issuing replacements are some crucial and improved processes that are automated by a state of the art RLM solution.
IT resource reduction: By deploying an RLM on a SaaS platform, multiple instances and replication of expensive hardware and its maintenance are eliminated. The time to deploy the standardized SaaS RLM platform allows for any location to be ready in hours, not weeks or months.

These benefits help an RL operation achieve a best in class standard level of performance. The benefits can in turn be measured in terms of improved operational metrics such as:

SLA compliance
Repair Turnaround Time (TAT)
Cycle Times
Output Yield
Quality Levels
Repeat Failures

In turn, these improvements in operational performance can be monetized directly in the form of cost savings, productivity gains, revenue gains, and improved cash flow. Clearly, the implementation of an RLM will produce a significant ROI that justifies the business case and results in higher gross margins and reduced operating costs, not to mention improved quality levels and customer satisfaction. As such, RLM offers a strategic framework for transforming a Reverse Logistics operation jnto a strategic profit center.

To learn more about the benefits of RLM and how to acheive them in your organizations click here.

What exactly is Reverse Lifecycle Management ?

Fri, 06 Aug 2010 21:55:00 GMT

As many of you know, I recently authored a white paper titled Reverse Lifecycle Management: The Next Opportunity in Reverse Logistics. I received a lot of favorable comments from people who took the time to download and read the article. Thank’s so much . There were, or course, a few readers who expressed words of caution about the promise of the Reverse Life-cycle Management (RLM) concepts discussed in the paper. One person commented that an optimal RLM system based on best practices might be a good idea but without good project management and a willingness by the client to re-engineer some business processes the best solution can easily turn into a nightmare. Another person expressed concern about the quality of data being captured by the system. Their view was that a RLM solution may be world class but if it doesn’t collect that right data to improve operating effeciency and productivity or product performance, then it is useless.

Well, I couldn’t agree any stronger. Good project management and executive level buy-in are critical to a successful RLM implementation. I would say these components are important to any type of initiative that involves change. This is also true with respect to caputuring good, useful and reliable data as expressed by the old adage… “garbage in/garbage out”. RLM must consider the needs are all stakeholders, and that is an important distinction and decision that designers of a RLM solution need to take into account. Who are the stake-holders? Where do they fit in? What is their relationship? Where to they have an impact? These are are questions that must be answered when determining what type of data needs to be captured in the RLM solution.

One of the greatest benefits of RLM, and there are many, is that it provides a systemic platform for capturing, managing, analyzing and disseminating critical business intelligence necessary for optimizing an Reverse Logistics Operation regardless of the end-user's demographics (i.e., years in business, number of employees, market served, number of customers, type of business, etc.). Basically, RLM is a strategic framework for defining system functional requirements. Our view, which is supported by very extensive market research is that the current R.L. systemic infrastructures of most OEMs/3PSPs/Retailers/etc. are very fragmented and lack critical feature functionality for capturing critical data about the R.L. Supply Chain. Up until now, RL Supply Chain professionals have not had many available options for resolving systemic issues such as data accuracy, visibility, root cause analysis, etc. Instead, these professionals have had to either ignore the situation, create workarounds, or use brute force to resolve problems as they occurred. This in turn has had negative consequences on operating costs, personnel productivity, and the overall customer experience.

RLM is a new industry standard and will help entrenched management mitigate and avoid the above challenges by helping them to anticipate, plan, and monitor RL events. I hope you will see the value of the RLM concept. Please share with me you thoughts, comments, and criticisms so that we may continue to build awareness of the challenges and potential solutions to Reverse Life-cycle Management.

A Recipe for Building Extraordinary Customer Service

Wed, 30 Jun 2010 18:56:00 GMT

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July 4^th is Independence Day in the United States. We know that summer is finally here when this holiday rolls around. The summer brings with it fireworks, long week-ends at the beach, back yard picnics, and outdoor barbeques. I love this time of the year because I like to grill. My friends and I like to create recipes and share with each other. We can get very competitive about whose recipe is the best and often challenge each other to a “throw-down”. This is where we cook a recipe and invite our friends and family to judge who made the best dish.

In keeping with this theme, I want to tell you about a LinkedIn discussion appearing in the After-Sales Service group that I recently participated in. Erin Petruk of CSDP Corporation asks, "Does anyone have a recipe for building great customer relationships?"

Well Erin, here's my reciping for creating long term, mutually beneficial customer relationships:

In any size organization:

1. Place in leadership, mission, and objectives

2. Hand pick motivated and trainable people

3. Combine empathy, listening, and communication skills

4. Mix in quality systems, processes, and controls

5. Add measure of customer satisfaction

6. Sprinkle in courtesy & personal attention

7. Repeat processes often

When ready to serve, have a sense of urgency and deliver with a smile.

In response to my post, Erin posted her own recipe:

1. Start by rolling out a foundation of trust. Add a large amount of honesty to your relationship and always deliver what you promise.

2. Peel and slice the customer’s words in order to really understand what they’re telling you. You need to LISTEN in order to know what’s best for them!

3. Add a heaping cup of open communication. The customer wants you to acknowledge their intelligence and feel respected.

4. Place motivated, understanding, and courteous employees into a large pot and gently stir in training, objectives, and leadership so that they will do anything to satisfy your customer.

5. Prepare your customers for any problems or setbacks that may occur.

6. Mix in proactive service in order to anticipate your customer’s needs.

7. Skim off any insincerity. Customers want genuine interest and earnestness.

8. Combine these ingredients in order to build the best customer relationships possible!

9. Garnish with random friendly phone calls just to check in and genuine cards to say thank you!

I know a “throw down” challenge when I see one. I am asking that readers of my blog sample these recipes and let me know which they like best. Our recipes are, of course, best served together. No doubt, the connoisseurs of extraordinary service among you will agree !!

Blumberg Advisory Group, Inc. (www.blumberg-advisor.com) has been creating recipes for building extraordinary customer relationships for over 40 years. To learn more recipes for serving up increased customer satisfaction and service profits contact me at michaelb@blumberg-advisor.com.

Service in the Clouds: A new paradigm for Aftermarket Service- Part 2

Wed, 26 May 2010 20:32:00 GMT

In my last blog post I discussed how Cloud Computing could have serious ramifications on the future of Aftermarket Service & Support. Currently, most service delivery paradigms are oriented toward an “old school” environment of very complex, installed base of networked technology. New advances in Cloud Computing (“New School”) now make it possible for everything from software applications, to operating platforms, to computer processing and storage (i.e., infrastructure) systems to be provided remotely through the internet. To access the clouds, all one needs to do is to plug in through their favorite digital device whether that is a Notebook, Netbook, Smart Phone, or some type of industry specific portable terminal (e.g., scanner, monitor, camera, dispenser, etc.)

While there is a high probability that cloud computing will become ubiquitous throughout the industry, there is a significant amount of “old school” technology out there that still needs to be maintained and supported. The challenge is to manage old school and new school environments on an optimal basis. Companies will, of course, still need to run aftermarket service as efficiently a possible using state of the art technology and best practices (e.g., Field Service Automation, Last Mile Delivery, Resource Optimization platforms, etc.). However, there are a number of current and emerging trends which need be considered when developing an optimal strategy to support “new school” computing advancements. These include:

1. Variable Workforce & Installed Base Management- Service Providers need to be lean and mean while they transition from the old school to the new school. Cloud Computing is very disruptive to companies who maintain a large work force of field service and depot repair workers. Variable force models provide a mechanism to convert high labor costs, which are fixed in the short term, into a truly variable, transaction based expense. Analytics about the frequency, cause, and corrective action associated with service events are even more critical than ever before toward optimal installed base management. Other applications like Remote Monitoring provide the online engine for collecting real-time data about installed base and offer a proactive tool for anticipating and even avoiding service events.

2. New ways of monetizing services – Revenue streams associated with on site events such as SLAs, roll-outs, configuration management, etc. may no longer sustainable in the cloud computing environment. Service providers must monetize these types of services through a subscription based model as well as make the offering easily accessible through an “As a Service” model. Payment for front-end, start-up services like training, installation, etc. are now bundled into a transaction based, subscription model. This means that service providers will need to how to learn price services accordingly which may result in amortizing the costs over a period of time. Financial modeling and CAPEX management are among the skills that Service Managers need to succeed in this new school environment.

3. Greater Demands on Reverse Logistics - The migration to cloud computing has a significant impact on reverse logistics because consumers will likely purchase more and more low-cost devices that plug into the clouds. This leads to greater requirements on the efficient disposal, repair, and recycling of used and unwanted products. The dominate support paradigm is also changing as well. Today, a virtual “firewall” exists between those who manage field service personnel and the customer relationship, and those who manage the reverse logistics supply chain. Progressive companies are combining field service and reverse logistics under one roof as field service becomes more of a commodity service focused on the efficient movement of resources within the reverse logistics supply chain. Whereas the customer relationship is now transitioning to those who operate and maintain the cloud.

4. I.T. Department requirements of the Individual Consumer – The proliferation of portable, smart digital devices which can download applications and plug into the clouds requires that the individual consumer become more tech savvy. In essence, every consumer will become their own I.T. department and will need options for support. We have already begun to see the emergence of B2C service providers who can answer questions occur about interoperability, compatibility, collaboration, service quality, and supportability.

Obviously, there is a lot to think about and even more to do to succeed in this new school environment. Blumberg Advisory Group is and has always been on the forward cutting edge in terms of working with clients to pioneer new advances in Aftermarket Service. A phrase we often heard during the early years of the internet was “act now or become road kill on the information super highway”. This statement rings true today so please act now and avoid becoming road kill.

Service in the Clouds: A new paradigm for Aftermarket Service- Part 1

Tue, 27 Apr 2010 20:17:00 GMT

A decade ago I wrote an article titled “Can Field Service Survive?” At that time, I made the prognosis that the business of High-Tech Field Service was alive and well, and would continue for some time. This prediction was made in light of industry trends (e.g., remote support) that were bringing the viability of Field Service into question. My belief that Field Service would remain viable was based on several observations namely 1) a marketplace characterized by a very complex installed base of networked technology, 2) increased customers requirements and willingness to pay for onsite service on a timely basis 3) requirement for a vast array of resources (e.g., parts, labor, data) needed to support customer requirements, 4) availability of commercially available off the shelf technology (e.g., Field Service Automation, Dynamic Scheduling, Mobility, Service Parts Optimization) to manage service on an efficient basis.

Basically, my article was written in the days before cloud computing. Sure, we had the internet with all its hope and promise; a few innovative companies were even turning to hosted internet solutions to operate enterprise systems. However, all the heavy computing and network connectivity was performed on the customer’s premise. The idea of outsourced Applications (Software), Platforms, Infrastructure made available through internet “as a service” technology (e.g., SaaS, PaaS, and IaaS) was just a glimmer in the eyes of many futurists. I doubt that most Service Executives or Service Strategy consultants fathomed the extent that cloud computing would have on Aftermarket Service & Support.

Now that a full decade has passed, I have revisited my assumptions. To tell you the truth, I am not so sure that I can say the same about the future of field service as I once did. To quote Will Rogers…”The future isn’t what it used to be”. While many of the observations I made back in 2000 still exist today, the biggest difference is the installed base of technology has changed significantly. Instead of a large installed base of powerful machines cobbled together through a patchwork of Local Area and Wide Area Networks, everything from software applications, to operating platforms, to computing processing and storage can be provided remotely through the internet. Furthermore, operating platforms are open instead of proprietary which means more interoperability between devices and users. End-users can plug into the cloud from anywhere using any device (e.g., mobile phone, Netbook, Notebook, Set-Top Box, Game Console, etc.). The devices themselves are becoming smaller and smarter, and can sense the condition of the environment in which they operate. More importantly, virtualization and miniaturization has resulted in devices which contain standard components that are more affordable to purchase and easier to repair. And because they are more affordable, they are easier to replace resulting in a greater need to recycle and/or dispose of obsolete technology.

Indeed, we now live on a planet that is smarter, greener, more intelligent, and more dynamic than ever before. This paradigm shift is not specific to just computers. Everything that once relied on big iron and/or electrical or electromechanical processing on premise can now be performed at a centralized, remote location. It applies to electricity, healthcare, telecommunications, transportation systems, building controls, you name it. Take Healthcare for example, telemedicine creates an environment where nurse practitioners can use intelligent instrumentation to perform a brain scan from a rural healthcare facility, the image is then processed by an MRI machine in another country, and read by a doctor in yet another country.

This new paradigm brings into question what type of service and support needs be performed, when, by whom, and for how much. Are Service Level Agreements still relevant in this new world? Do we need a large field service workforce? How do we account for assets and manage customer relationships? We will explore this and attempt to bring some high level answers in our next blog post.

Stay tuned…

The Hard, Cold Truth About Exceptional Service in the Aftermarket

Thu, 08 Apr 2010 17:37:00 GMT

I have been following a number of discussions on LinkedIn related to the definition of exceptional service within the Aftermarket. Most of the comments take the view that front line service personnel are the key to exceptional service and that these people should be trained to delivery service with a smile, have concern for the customer, and have authority and responsibility for front line decision making. These comments suggest to me that a “warm and fuzzy” disposition is all that is needed to ensure exceptional service.

The cold and hard truth is that exceptional service involves so much more. There is no doubt in my mind that all employees, from the CEO to the front line worker, are critical to the success of any business and that customers love it when service is provided to them by someone with a smile, a warm heart, and empathic ear. However, I can think of countless times when I've seen businesses who offered horrible service in terms of timeliness, accuracy, consistency, etc. while losing money hand over first even though they empowered their front-line employees and trained them with good people skills.

To me, exceptional service means to know what the customer wants and deliver it on time, every time on a consistent, predictable, and repetitive basis. It is the role of a Service Executive to understand and deliver extra-ordinary services. The key to extra-ordinary service is to define the tangible aspects of service from the customers' perspective (That's Market Research 101). In essence, define what the customer’s expectation is in terms of time, accuracy, and availability. Obviously this may differ from industry to industry and/or segment to segment. That’s why market research is so important.

Next, have a system and processes in place to deliver service on a consistent and repetitive basis. Obviously, we will want to train all employees on these processes. Exceptional service also requires you establish a problem-resolution process to account for mistakes/error as they will happen; we are only human and nothing is “fail safe”. Last but not least, measure performance and improve where needed. Make sure everyone from the CEO to the front line worker knows what the metrics are. Continuously ask the customers for feedback on how to better meet their needs and proactively offer solutions which you've identified through your knowledge management process.

In summary, the cold, hard truth is that exceptional service is not only about people and communication, but about data, technology, and processes. State of the art service management solutions, collaborative computing platforms, mobility solutions, analytics and other related technology make it possible for any company to create an environment where every employee, from the CEO to front-line, can deliver exceptional services.

To learn more about the cold, hard truth of exceptional service and how your company can deliver it too visit our website www.blumberg-advisor.com or contact us at 215-643-9060.