DIFFERENTIATED SERVICE LEVELS IN SPARE PARTS SUPPLY
ISLA Service and Logistics Summit 2016
Benedikt König
Differentiation is a complex undertaking when being applied consistently in a modern supply chain
• The supply chain from Wärtsilä spare parts offers complexity
• Various customer groups have different requirements
• Today we translate customer classification and order situation into a priority level
• The priority level leads to various differentiations along the supply chain
• Some differentiation cannot be done in the existing business model – but requires a new business model
• The implementation of the differentiation took time
• During the implementation we learned a lot
• Q&A
CONTENT
The supply chain from Wärtsilä spare parts offers complexity
INTRO
We serve
12,000
customers
115,000 deliveries, constituting more than 900,000 line items, packed in 134,000 packages
In one year: 16,300,000 kg
of parts, with a total volume of 46,700 m3 117,000
unique materials stored
66,700 export
declarations
Around 106,000
transportations making use of roughly 150 carrier
modalities
We maintain knowledge and skills for 350 different product types
Our 3,600 field service professionals perform
100,000 field services jobs
We provide 20,000 technical answers
We maintain 450
installations under long- term contract
...One promise to the customer:
We offer expertise, proximity, reliability and responsiveness for our customers in the most sustainable way
Wärtsilä Corp.
2015 sales of EUR 5,029 million with an EBIT rate of 12,2%
Wärtsilä Services 2015 sales were EUR 2,184 million
Various customer groups have different requirements
CUSTOMER
Preventive solutions Responsive solutions Optimizing solutions
Willingness to in- vest in certainty
of operations High
Low
Willingness to use external
expert support
High
Low
Customer need = What we offer
Customer value category = How we sell and serve AAA
AA
A
Partners OEMers Balancers DIYs Savers KAM customers
Customers most likely to be satisfied
with Wärtsilä core service level Customers most likely to
choose “full service”, i.e.
advanced modules
Customers most likely to choose at least one advanced
module
CUSTOMER
Today we translate customer classification and order situation into a priority level
KAM P2
AAA P3
AA P4
A P5
Other P3
Quotations Priority setting based on Customer Category and Delivery Service Level
Based on analysis of Sales and history, this will result in following priority level split
regarding part sales and deliveries
Other = Customers without category value and Wärtsilä companies
Emergency (S1)
Accuracy (S6)
Open (S2-S4)
Unclear (S5)
KAM P1 P1 P2 P3
AAA P1 P2 P3 P4
AA P1 P2 P4 P5
A P1 P2 P5 P5
Other P1 P2 P3 P4
KAM P1
AAA P1
AA P1
A P1
Other P1
Advanced Service Support
Spare parts orders
The priority level leads to various differentiations along the supply chain (I)
DIFFERENTIATION
Quote Order
RFQ Support
Customer Contact
Identify Customer
Dedicated resources
Differentiated detail of asset available
Priority by customer category
Qualification of contact persons
Priority in Tech ID, alternative execution
Depth of
investigation
Priority by
customer group / priority level
Verification of lead times / expediting
Priority by
customer group / Priority Level
Verification of lead times / expediting / order
correctness Reconfirmation response times
The priority level leads to various differentiations along the supply chain (II)
DIFFERENTIATION
Distribution &
Invoicing After Service
Supply Picking & Packing
Depth of lead time verification
Priority of parts in stock
Priority / extent of supplier expediting
Inbound delivery
Priority in quality inspection / tuning / reclassification
Priority in Priority level and delivery date
Usage of fast lane
Priority by
priority level and delivery date
Utilization of express
delivery,
Special support
Customs support
Priority by customer group / Priority Level
Support for non
conformities (Wärtsilä caused or not)
Response times for immediate corrective action
Feedback level of preventive actions
Some differentiation cannot be done in the existing business model – but requires a new business model to fulfill those customer needs
DIFFERENTIATION
• Old engine base require to maintain
• Spare parts stockings
• Technical competence
• Sourcing competence
• Manufacturing competence
• Old engine base do not offer
• Volume
• Similar margin (on average)
• Old engine base have the risk
• Scrapping of old stock
• Self alimentation of resources
• Upsetting customer base
QuantiParts offers you OEM parts for classic Wärtsilä engines
The best technical know-how, 24-7 parts services and cost-efficient solutions.
QuantiParts is here for you and your engine
The implementation of the differentiation took time
PATH
2012
1. Profitability anaylsis 2. Blueprint 3. Resourcing
4. Customer value category.
1. Portal planning
2. Parts development
3. Tech request development
4. Customer verification.
2013 1. Understanding
of impacts
2. Finetuning of parameters
3. Cause / Impact adjustment
4. Continued people training
5. Regional center roll out
2015
1. Account management model
2. Portal pilot
3. Parts pilot frontline
4. Advanced Services model pilot
5. Regional centers
2014
2016
1. Roll out model
2. Renegotiation of accounts
3. Parts
implementation along supply chain
4. Knowledge base priorisation 5. ASM roll out 6. Regional center roll out
During the implementation we learned a lot
• We spent quite some time on the market analysis, customer segmentation, getting commitment from the organization
• Once marketing has decided what to do – they expect to implement. However it is a long way from powerpoint bullet to a detail requirement definition of the sytems, to the SAP implementation, to the people training / understanding
• Do not underestimate the impact of master data
• There is a clear difference on topics that customers claim to be mandatory and customers are willing to pay for (sales people are willing to charge their customers)
• Sometimes the effect of a differentiation is different to what one would expect to see. If you differentiate e.g. by customer you should not forget that also their ordering behavior is
different – which may turn out disappointing results. Fine tuning is still a journey
LEARNINGS
LEARNINGS