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(1)

DIFFERENTIATED SERVICE LEVELS IN SPARE PARTS SUPPLY

ISLA Service and Logistics Summit 2016

Benedikt König

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

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

(8)

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

(9)

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

(10)

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

(11)

LEARNINGS

Q & A

(12)

References

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