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"Service parts or spare parts are a blessing and a curse for many discrete manufacturers."
- ARCwire for week ending April 11, 2003
The challenge Aftermarket parts management involves a number of critical processes that often span multiple organizations and geographies in order to deliver a part to a customer on time. Think about how planning, order processing, inventory, fulfillment, manufacturing, maintenance, replenishment, suppliers and delivery all must work in concert to keep inventory levels optimized and meet all service level agreements. Worse yet, the number of unique parts to be managed is increasing, with the demand for each part being low and unpredictable, and the location of the demand highly uncertain.
If a company manages aftermarket parts well, it can enjoy the benefit of a substantial margin on parts. But, if it does it poorly, it risks losing more than potential profits. Customers and brand value are at stake. Seeing an opportunity to bring significant value to the challenge of aftermarket parts management, several IBM divisions are collaborating to develop an integrated aftermarket parts solution. This solution is part of a focus on the after-sales market.
The approach Imagine sitting down and instantly seeing the effect that changing certain parameters in an aftermarket parts system would have on key measures of business performance. Or, imagine being able to continuously monitor inventory and proactively optimize it depending on current circumstances. IBM is working to make those images a reality by combining value modeling, advanced analytics, forecasting, integration frameworks, data warehousing and simulation into a powerful collaborative portal.
Value modeling will make it possible to evaluate the effect variables such as service level agreement requirements, supplier reliability or forecast accuracy could have on key business performance measures. IBM Research's expertise in value analysis is based on years of theoretical development and has resulted in numerous patents being issued for their work. In the case of value modeling for the aftermarket parts solution, Research's expertise is combined with insight from IBM's own experience in managing aftermarket parts processes and IBM Global Business Services' knowledge of supply chain management.
Another key capability under development is the integration of critical analytics, such as demand forecasting and inventory optimization, into the business process framework of aftermarket parts management. This will support continuous monitoring and adjustment of inventory as well as govern parts orders and requirements for supplier reliability.
Finally, there is integration of data from disparate sources into a unified data warehouse. Data that could provide real-time performance measurement and be shared with suppliers to drive collaboration across the value chain. A central collaborative portal will be the aftermarket parts management hub. This portal will provide dashboard tools, decision support, connection to key processes (such as order fulfillment or inventory planning) and could serve as an exchange place for suppliers.
Taken as a whole, the aftermarket parts solution under development has the potential to transform a company's aftermarket parts management into positive business results and customer satisfaction.
Next steps The solution will also potentially drive two major kinds of transformation. First, aftermarket parts management could be outsourced as an on demand business process not unlike how many companies handle procurement. This would allow companies to benefit from expertise they may not possess and improve important business processes and reduce costs without taking large risks.
Second, when a company's entire aftermarket parts process is managed using the future solution, it will be possible to become a sense-and-respond organization. This means that a company will be able to sense changes in the market or business context, interpret them, make decisions, act on them, learn from what it's done and adapt to what has happened. Along the way, capabilities are coordinated to continually deliver business results. The new solution is being designed to provide the integration, analytics and collaboration necessary to make this ideal a reality.
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