Webinar: Service logistics, dealing with products subject to unpredictable replacement demand
March 20, 2014 | 2 min read
When aircrafts, MRI scanners or large industrial machines no longer work due to defective parts, high costs ensue. Yet, stocking spare parts also has its disadvantages. Service logistics strives to find the right balance between the ability to quickly purchase the parts and stocking the parts. During a webinar on 20 March, Jürgen Donders, partner at Gordian Logistic Experts, will discuss the challenges and opportunities of this often still unknown segment of logistics.
What is service logistics?
Service logistics is the logistics of costly parts of machines or vehicles. When these machines or vehicles are immobilised, it often creates high costs. For example, consider a part of a KLM aeroplane at the gate, loaded with people, diagnosed as requiring replacement at the moment of departure. If the part is not in stock and must be ordered, the result is a long wait and consequently very high costs.
The company for which I work, Gordian Logistic Experts, provides advice to companies about service logistics, executes improvement projects, and performs parts planning for companies. We do this for companies in the aviation and railway sectors. We also provide these services to companies in harbours, notably for parts of expensive cranes, or in the healthcare industry, with respect to expensive MRI scanners. We frequently advise the companies that use the parts, rather than the suppliers of the parts. After all, those suppliers often benefit from maximising sales. Unlike the suppliers, the users of the parts must weigh how to achieve the best balance between availability and stock (expenses).
Unpredictable replacement demand
Are those parts not in stock by default?
These are parts that are subject to an unpredictable replacement demand. You might not need the part in a given year and then need it three times the following year. Usually, you review the history of the demand and make purchases on the basis of that review. In this case, that is much harder to determine. There are also many disadvantages to keeping the parts in stock. The parts are expensive, while remaining on the balance sheet of the company when unused. In addition, these are parts of which the technology quickly becomes outdated. A printed circuit board can become outdated after a year, rendering your stock valueless, for instance.
Not all opportunities are exploited
Is there still much to improve in this area?
Service logistics is an often unknown niche in logistics. Moreover, it often happens that not all opportunities are exploited. This happens because the people in this field (maintenance) do not necessarily understand logistics, as the majority of them are maintenance people whose expertise is focused on the machines. In many instances, they do not realise that there are other options for handling stock. Yet, they are increasingly frequently confronted with this issue. The financial crisis exerts increasing pressure on stocks, which have to be reduced.
We regularly recommend organising the assortment in a different manner. Buy enough of the stock with a high turnover. For the stock with low or no turnover, make agreements with suppliers or look for other possibilities for collaboration.