Smith is certainly correct that the sudden lack of parts availability could have a crippling effect on many manufacturers. However, he and his colleagues at Syncron were able to offer their customers some room for maneuver largely based on the visibility that the solution offers into their customer’s parts inventory.
“We have now since moved through that immediate phase though and are looking at smarter ways of working,” Smith explains. “One of the things that we have to do for example is to help many of the manufacturers who use our software identify where there maybe potential stock within their dealer networks.
“In many instances, the case would be that some dealers would have extra stock available of one part and other dealers may have spare stock of another. By enabling our clients that visibility across their dealer network as well they were able to arrange parts swaps which meant that there was a more even distribution of parts across the regions as a whole.”
However, while this has offered some respite for Syncron’s customers in the face of the continuing challenge of that crucial aspect of field service delivery of getting the right parts to the right place at the right time, Smith was able to share some further best practices that he is seeing emerge from the companies he is working with.
“Moving forward, many of our customers are now looking at establishing more diverse supply chains,” he explains. “Many companies are now looking at having multiple suppliers of inventory – I think in general we have become so used to having single-source suppliers but one thing the pandemic has revealed is the importance of being able to build some resilience into our supply chain.”
Of course, we really shouldn’t forget just how significant the value involved in the spare parts sector.
These parts cost a lot of money to move around and it also costs a lot of money to maintain them in huge warehouses, so the economic value of this whole side of the aftermarket sector is phenomenal. As Smith states “I think we are going to see customers suddenly realising that this whole aftermarket space is a huge form of cash generation.”
“As cash gets more squeezed for these businesses for their finished goods, for example, car sales fell by 82% in China across February, so companies will realise that the aftermarket parts are a huge cash generator for them,” he continues. “If you can run that part of your business well you will generate a huge amount of cash. In fact, one of our largest client’s Volvo has furloughed all of their staff with the exception of those within the spare parts side of the business.
“For me, the pricing aspects also start coming into the equation as well,” Smith adds.
“There are obviously massive changing demands in the marketplace which I think has really woken people up to two things. Firstly, there is the fact that we need to generate more cash form our aftersales business and understanding that opportunity is key. Secondly, companies are also perhaps realising that there are huge lost opportunities of margin generation in the way they price either parts or finished goods.”
However, there is another potential positive that Smith thinks the current crisis may bring to the fore. Namely the further rise of servitization. “Moving forwards the other thing that I am really passionate about is the whole servitization piece,” Smiths comments “and I think that this may be the crisis that creates the pivot point that drives us fully into a servitized market. I see parallels of 2008 when we really saw the emergence of the Software as a Service (SaaS) model.
“At that time, although SaaS had been around for a while, but the market pressures really drove the model to the fore. I think we may be about to see the same thing with servitization. I am sure that there are some manufacturers out their right now who are product-centric who wished they had a servitized business providing them with a stable and regular income at this time.”