Spare-parts logistics of the supplier of spare parts

Good service at low logistics costs

As part of customer service, manufacturers offer spare parts to their clients. Good customer service is characterized by reliable deliveries and low logistics costs. This is the only way to help customers in a way that meets their needs and keeps costs at acceptable levels. Furthermore, a supplier who provides good service can gain a considerable competitive edge over his competitors and capture the after-sales market. In the process, constant monitoring of logistics costs remains essential.

Spare-parts service as a competitive advantage

The spare-parts service is becoming increasingly important to companies because a large share of after-sales revenues is generated with spare parts and services related to spare-parts logistics. In addition to spare parts in the current primary product Primary product line, this business also includes spare parts for out-of-date products that must remain available as a result of guarantees and maintenance contracts.
A crucial competitive factor is that the primary product Primary product and the provision of spare parts to customers should not be perceived as being separate entities. Rather, the customer demands a full range of services that also include maintenance and technical assistance to go along with the provision of spare parts.
In particular, the increasing variety of primary products Primary product poses a major challenge for spare-parts service. For instance, the innovation and market-introduction cycles of products are becoming shorter and shorter even though the service life remains the same or is even being lengthened. In addition, more and more customer-specific and complex products are being developed. The length of guarantees for spare parts is rising as well. This is causing demand to spread over several products. As a result, demand per product is decreasing [1].
Special features of spare-parts logistics
Spare-parts logistics of the manufacturer has several special features in comparison with the logistics of the primary product Primary product :

Spare-parts sales are preceded by a negative customer experience in the form of the downtime of the primary product.
The need for spare parts can be planned only to a limited extent.
The need for spare parts depends, among other things, on the number of primary products that are sold, the maintenance measures that are carried out and the life cycle of the parts that are in use. As a result, spare-parts sales can be boosted only to a limited extent by marketing efforts.
Spare parts often require detailed explanation and are frequently sold in connection with customer service.
Spare-parts assortments - i.e., depending on the necessity for the functional capability of the primary product - cannot always be created solely on the basis of economic factors.
Even if product innovations lead to the replacement of discontinued primary products, spare parts for old and new primary products must remain available, a fact that produces a constant expansion of the assortment. Furthermore, demand planning for replacement parts must be carried out for discontinued products in order to have sufficient quantities on hand to satisfy the demand for spare parts.
Spare-parts customers frequently are not end customers, but are usually repair shops [2, 3].

Delivery-service requirements

An efficient design of spare-parts logistics Spare-parts logistics creates special demands on the delivery service Delivery service :

To eliminate downtime, fast delivery of spare parts is necessary.
When maintenance measures for the customer can be performed only at particular times like weekends or only when needed and not at regular intervals as part of upkeep programs, delivery reliability becomes especially important.
The sale of spare parts is usually preceded by a negative event like the breakdown of a primary product. For this reason, the delivered goods should not have any defects in order to prevent a negative experience from becoming even worse.
Spare-parts orders are frequently emergency orders that require tremendous delivery flexibility in terms of order transmittal, shipment routes and means of transport.

For suppliers of spare parts, the availability of these items at the time when the customer needs them is a critically important factor. Naturally, the costs of spare-parts provision must be taken into consideration - particularly warehousing and transport costs [4].

Warehousing costs

For spare parts, warehousing costs are comparatively high because spare-parts inventories generally represent a large assortment of which only small amounts are needed. Warehousing costs can be affected by selective warehousing Selective warehousing . In a reflection of this, all parts that are frequently used and are essential to the operational ability of the primary product Primary product can be stored near the customer - e.g., in distribution centers or workshops. In addition, a company must ensure that customer-service employees can be supplied with these parts as quickly as possible and that they always have a basic supply with them.
Parts that are needed less frequently and are not absolutely essential can be stored in central distribution centers because, in this case, the customer will accept a somewhat longer delivery time. It is also possible to base the selection of the parts on the customer’s maintenance practices. For instance, all parts that are needed for preventive maintenance activities or that the customer’s warehouse itself keeps can be stored in a central warehouse because less urgent requests for stock replenishment can be processed here [4].

Transportation costs

The inclusion of other nodes like repair workshops and the processing of urgent orders increase the logistics network’s complexity. As a result, the transport processes become more complex and costs rise.
One other factor to consider in shipping is that the order volume per customer is also small for job shops. For this reason, the delivery service must travel to very many destinations in the logistics system to distribute relatively few parts. As a result, it is hardy possible for the supplier to sufficiently utilize the delivery fleet. The outsourcing of shipping to a third party is a more economical alternative [4].

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References

[1] After-Sales-Management im Maschinen- und Anlagenbau | Baumbach 2004
[2] Ersatzteilwesen | Hug / Männel 1984. In: Kundendienstleister-Handbuch | Wendling (Hrsg.)
[3] Logistische Aspekte der Ersatzteilversorgung | Lukas 1984. In: RKW-Handbuch Logistik | Baumgarten u.a. (Hrsg.)
[4] Logistiksysteme | Pfohl 2004