MANUFACTURING      Six ways to boost service                                                               VK Gopalakrishn...
Six Effective AMS Commandments for Powering Intelligent                                Real Life ExampleManufacturing Ente...
by the First Time Fix Rate (FTFR). A field visit without either the                          Incorrect extension of warran...
About Genpact:                                                                             Author ProfileGenpact, a global...
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Six ways to boost profitability and improve customer satisfaction

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Global economic volatility is the new reality. Escalating costs, changing technologies, complex regulations, unpredictable markets and record deficits are impacting businesses around the world and have created new challenges in meeting shareholder expectations.
Aftermarket Services (AMS) have become increasingly important as manufacturing organizations look for ways to generate profits,
reduce costs, differentiate themselves and drive overall enterprise growth in these market conditions. However, a robust AMS program can be challenging to develop and implement. This paper identifies six strategies to help AMS service operations become globally effective, in turn driving higher customer satisfaction and better business outcomes.

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Six ways to boost profitability and improve customer satisfaction

  1. 1. MANUFACTURING Six ways to boost service VK Gopalakrishnan (Gopal) Vice President & Global Practice Leader, Genpact profitability and customer satisfactionGlobal economic volatility is the new reality. Escalating costs, changing technologies,complex regulations, unpredictable markets and record deficits are impacting businessesaround the world and have created new challenges in meeting shareholder expectations.Aftermarket Services (AMS) have become increasingly important as manufacturingorganizations look for ways to generate profits, reduce costs, differentiate themselves anddrive overall enterprise growth in these market conditions. However, a robust AMSprogram can be challenging to develop and implement. This paper identifies six strategiesto help AMS service operations become globally effective, in turn driving higher customersatisfaction and better business outcomes.Aftermarket Services (AMS) have become a priority for CEOs and Common barriers to a successful AMS program include:CFOs, who recognize AMS’s contribution to top- and bottom-line • Insufficient CXO focus on service functionsimpact and customer loyalty. Previously, customer or field servicefunctions were responsible for driving after-sales customer • Broken or bad processes across the service fulfillment cyclesatisfaction, and service supply chain functions were responsible for • Multiple technology systems (legacy, web based)reducing service operating costs. • High spare part inventoriesThe economic landscape is much more challenging now. • Warranty and service billing leakagesCompanies are witnessing declining sales and customer attrition;price and product features are no longer significant market • Low installed base contract coveragedifferentiators, and operating costs remain high. To drive enterprise growth, senior executives need to focus onBarriers to Achieving Greater Effectiveness the entire service lifecycle, including customer service, warranty, service contracts, field service and parts. The process must beAMS has the potential to help manufacturers power a more enterprise-wide and drive operational efficiencies. It should includeintelligent enterprise, one that is more competitive, profitable and outcome-driven effectiveness projects, removing bottlenecks atdifferentiated in the marketplace. However, it can be challenging to the sub-process level or at functional interfaces, and deploying thedevelop and implement a robust AMS solution or program. right technology.
  2. 2. Six Effective AMS Commandments for Powering Intelligent Real Life ExampleManufacturing Enterprises A leading aircraft engine manufacturer achieved improvedA well-crafted AMS solution helps manufacturers become more forecasting accuracy and turnaround time of deal pricing by“intelligent” by optimizing field service operations, driving supplier 30-40% through the provider’s ability to see across operationsrecovery, improving the parts planning and management process, and connect the enterprise with better, more timely data, whichand driving a positive impact on service costs. Through our global increased the win rate of service contract deals.experience in managing the service lifecycle for manufacturing As part of major sales campaigns, the provider has helped wincompanies, Genpact has identified several ways of improving more than $1 billion in deals, and supports periodic review ofaftermarket service operations that can: the contracts to validate the forecasting and pricing• Significantly improve service revenue: Up to 25 percent assumptions, thus helping the client remain competitive and• Cut costs: Up to 20 percent adapt quickly to changing conditions.• Improve customer loyalty: Up to 10 NPS (Net Promoter Score1) 3. Enhancing Contract Coverage points Installed base analytics increases service coverage,Improvement areas can be categorized into two broad areas; resulting in 15% incremental revenueservice revenue opportunities and service cost optimizationopportunities. In addition to contract revenue, many manufacturers are realizing the importance of the Installed Base (IB) data in rollingService Revenue Opportunities: out targeted campaigns to specific customer segments. It is also1. Enhancing Capacity more lucrative to track yield on IB (revenue generated through Centralizing the service support desk releases 20-25% of a contracts), rather than IB coverage (percentage of IB covered field engineer’s capacity through contracts). Key challenges include knowing where the IB data is, whether it is in use or not, and identifying the current A key challenge field operations teams face is increasing their servicer. This is where IB analytics can help, including: capacity to service more clients in order to drive higher service business growth. The expensive and limited pool of experienced • Analyzing customer data, service history, etc. to identify field engineers and technicians should spend their time on potential customer segments based on the need for this type of service problems rather than engaging in non-value-add service administrative or analytical activities such as debriefing, • Defining segment strategies and service plans with high correcting or closing service requests. Genpact’s analysis shows probability of conversion that these non-value added activities can take up to 30% of field • Developing and executing holistic programs that include resellers engineers’ available time. and distributers Real Life Example • Running proactive campaigns to improve IB contracts coverage For a major healthcare equipment company, instituting an Real Life Example innovative change to service operations helped to drive higher service growth without increasing the size of the field team. A For a major equipment manufacturer, implementing process centralized and scalable field service support team handles all changes, web-based technology tools and process rigor non-value-added activities, freeing up 21% of field capacity, improved installed base data accuracy from 54% to >80%, thus boosting customer face time. leading to faster revenue recognition, reduced cost leakage and an improved targeted contract renewals program.2. Maximizing Contract Value Service Cost Optimization Opportunities: Implementing contract pricing analytics helps identify key levers, resulting in 10% increase in revenue 4. Optimizing People Costs For many equipment-manufacturing segments, service contract Consolidation of field engineer dispatch and parts order revenue is as important as the initial equipment sale. Long-term teams drives 15% savings service agreements are a win-win for both parties. This makes While metrics like MTTR (Mean Time to Repair) or FRT (Field the pricing of the contracts critical, both in terms of ensuring Response Time) are good efficiency metrics, customers are driven deal conversion and profitability. 1 Net Promoter is a customer loyalty metric developed by and trademarked to Fred Reichheld, Bain & Company, and Satmetrix. It is a management tool used to gauge the loyalty of a firms customer relationshipsby asking customers "How likely is it that you would recommend our company to a friend or colleague?" Based on response, customers are categorized intoPromoters (9–10 rating), Passives (7–8 rating), and Detractors (0–6 rating). The percentage of Detractors is subtracted from the percentage of Promoters to obtain a Net Promoter score (NPS).
  3. 3. by the First Time Fix Rate (FTFR). A field visit without either the Incorrect extension of warranty to non-entitled customers or parts being delivered on time, the wrong parts being delivered, non-eligible claims leads to revenue leakage and adds as much or arriving without the right tools results in lost money and adds as 10% to the warranty cost. While accuracy of claims to service costs. processing can be driven up significantly through detailed matching of contract terms with warranty claims, it is the claims Consolidating the field and parts support teams has the audit process, backed by an analytics-based reasoning code potential to deliver savings of up to 15% of field cost. Additional matrix, that can reduce leakages by 8-10%. savings of 1-2% can also be achieved through a consolidated field trip for preventive or regular fix visits. Additional savings of Once the warranty is paid out, it should be recovered from the up to 5% can be achieved through consolidation of remote suppliers to whom it is attributed. The root causes leading to low monitoring teams, leading to better coordination and response cost recovery are usually non-identification of the right suppliers time and reducing emergency field dispatches. or dependency on the failed parts that ought to reach the suppliers before the credit note can be generated.5. Optimizing Parts Costs Real Life Example Bill of Materials (BOM) drill-down analysis, dynamic forecasting and accurate triaging of parts result in a A leading equipment manufacturer faced high mismatch further savings of up to 10 percent between the warranty claims paid out vs. recovery from suppliers whose parts failed within the warranty period. Spare parts and component assemblies are a significant cost Implementing an intelligent approach to reconciling claims component of the service supply chain. Normally, capital through a blend of smarter processes, adaptive technology and equipment includes spare parts kits. BOM drill-down analysis of detailed analytics delivered supplier cost recovery of $10 million the kit and linking it to the kit’s usage patterns can optimize kit and a 47% reduction in the parts return cycle time. configuration, leading to cost savings of 5-6 percent. Dynamic forecasting based on spare parts usage and pooling of How to Power an Intelligent Manufacturing Enterprise parts at warehouses, all utilizing Lean inventory methods, can Companies across all industries have a set of common, core lead to savings of another 2-3%. In addition, during the service enterprise-level processes that determine how they acquire new fulfillment stage, accurate triaging of parts across regions or customers, retain them and grow existing relationships, hire and warehouses and efficient returns processes result in additional retain their workforce, develop and distribute their offerings and savings of 1-2%. This also increases response time and reduces manage their supply chains. What differentiates the leaders from obsolete inventory. the laggards is how they view processes as a key component of6. Optimizing Warranty Costs business outcomes. Supplier recovery can improve by 10-15% through By looking at a manufacturing enterprise’s entire service lifecycle, accurate data matching and driving the parts returns cycle. and by focusing on achieving greater efficiency and effectiveness Another 8-10% in warranty leakages can be plugged by across the entire spectrum of processes, it is possible to achieve disallowing invalid claims and audits significant and sustained business impact of up to 10-15%.The Genpact Value Proposition 3-4% 10-15% 2-3% 2-3% 2-3% 1-2% Current Customer Service Warranty Field Parts Projected Service Service Contracts Force Service Profitability ProfitabilityTo learn how Genpact can help you drive profitability and effectiveness in your services, and improve customer loyalty, please contact VK Gopalakrishnan atvk.gopalakrishnan@genpact.com
  4. 4. About Genpact: Author ProfileGenpact, a global leader in business process and technology management services, usesprocess to help its clients power intelligence across their enterprise to run smarter Gopalakrishnan VKoperations, make smarter decisions and use smarter technology. Genpact’s Smart Vice President and Global Practice Leader SMEnterprise Processes (SEP ) framework, its unique process thought leadership combined Gopal V K leads After Market Services for Genpact, a globalwith deep domain expertise in multiple industry verticals, results in better business leader in business process and technology management, whereoutcomes. Genpact’s Smart Decision Services deliver business insights to its clients he is responsible for strategy, growth, and P&L. Gopal has heldthrough targeted analytics, reengineering expertise, and advanced risk management. various leadership and advisory roles in multi-countryMaking technology more intelligent by embedding it with process and data insights, engagements encompassing consulting, process, and IT. He alsoGenpact also offers a wide range of technology services. Driven by a passion for process held key roles in the manufacturing industry. He is aninnovation and operational excellence built on its Lean and Six Sigma DNA and the legacy entrepreneur and a recognized thought leader in the supplyof serving GE for more than 14 years, the company’s professionals around the globe chain and aftermarket services, in demand as a speaker atdeliver services every day to its more than 600 clients from a network of 58 delivery leading conferences and forums. Gopal holds a masters degreecenters across 17 countries supporting more than 25 languages. For more information, in Business Administration and is a Mechanical Engineer, andplease visit www.genpact.com, Follow Genpact on Twitter, Facebook and LinkedIn. freely shares his knowledge on his blog at http://slmhub.comCopyright © Genpact 2012. All Rights Reserved.www.genpact.com For more information, please write to supplychain@genpact.com

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