How Supply Chain Orchestration Can Impact Spare Parts Management, Repair, and Refurbishment
They may not receive the same consideration as order fulfillment, but spare parts management and reverse logistics are vitally important to many businesses.
Consider that an estimated 20% of goods sold in the U.S. are eventually returned to their manufacturers at a cost of $100 billion annually, according to Deloitte, and you begin to get a sense of the size of the problem. We have already provided an introduction and looked at how Supply Chain Orchestration (SCO) will help you serve your customers. In this third post in our four-part series, we’re going to look at how SCO can impact your aftermarket performance.
Spare Parts Management
Whether it’s machinery running in a manufacturing plant or servers in a data center, downtime is a disaster for any business. Time is money. That’s why many companies commit to stringent Service Level Agreements (SLAs) that dictate repairs must be made within as little as an hour or two from a fault developing. That means you need to be able to get spare parts out quickly.
The problem with component failure is that it’s hard to predict what’s going to fail. The predictability of demand is different than for product sales, for example. You may also be supporting a broad set of products, but local inventories are unlikely to be deep. SCO can help you to ensure that your central depot supplies local depots in a timely manner to support the inventory levels you need to maintain SLAs.
What’s crucial here is multi-tier inventory visibility, so that you always know exactly what you have and where it is. Replenishing shallow local inventories, from a central or possibly global depot, down to a regional level and then out to localities, is a fine balancing act. Automation for replenishment and real-time data on inventory levels is required for proper spare parts management.
When a product does come back, whether it’s a spare part that has failed, or a product that a customer is returning, there’s a potentially complex reverse flow to manage. Every return must be routed to a facility that can inspect it. A spare part may be repaired and cycled back into the inventory. If it’s beyond repair, it might be broken down for usable components or recycled. Even if it’s going to be destroyed, there might be compliance considerations about robust data deletion.
For a product, the same process applies. It must be inspected and then repaired, refurbished, or recycled. The aim is always to maximize reuse and cut the cycle time down as far as possible. The turnaround time on a repair job might be two weeks, but sometimes you lack any insight into what’s happening at the repair facility. For a spare part that you may need to cycle back into use, this lack of visibility into reverse logistics can be costly.
SCO can provide not just a real-time overview of where your parts and products are, but also their status in the repair or refurbishment process, with alerts that highlight potential delays and allow you to make other plans.
Maintaining tight control over your inventory of spare parts and your repair and refurbishment processes through SCO will significantly boost your aftermarket performance.
In the fourth and final blog in this series we look at how Supply Chain Orchestration strengthens collaborations with suppliers.