Service Supply Chain:
Frequently Asked Questions
How do you track your service / reverse supply chain spend?
An Aberdeen report on Revisiting Reverse Logistics in the Customer Centric Service Supply Chain suggests that best-in-class companies incur 9% of their revenue as cost for managing their service supply chain. This number goes up to 11.9% for middle-tier companies. But hold on, here comes the most disturbing reality – 93% of the companies in the bottom tier do not even know their service supply chain cost. The report also suggests that service supply chain cost is at minimum ~ 9% for small companies (size less than $50M) compared to 14.6% for large companies (size greater than $1B). This could mean that smaller companies are probably managing their service supply chain cost better than large corporations.
Who is responsible for managing your service supply chain?
A survey by Tompkins on service / reverse supply chain suggests that only 38% of service supply chain organizations are led by vice presidents or higher level executives. Nearly 46% of the organizations are led by director-level people. These numbers clearly indicate that service supply chain has not received senior executive attention in organizations.
Is there an organization with separate P&L to manage your service supply chain or is it managed across multiple organizations?
A survey by Tompkins on service / reverse supply chain suggests that only 40% of respondents have a dedicated organization that manages their service supply chain activities. Others have this activity either performed by multiple internal departments, which are either integrated at a different level or not integrated at all.
If there is a service supply chain organization, is it a cost center or profit center?
In most companies, service supply chain organization is considered a cost center. In 2008, Best Buy created a separate business unit to “turn returns processing into a profit center.” Prior to this, they outsourced most or all of their return processing and repair activities to a third party. The key driver towards making this decision was quoted as “maximizing profit and sustaining it when product hits reverse supply chain.” Renewed focus on trying to find additional sources of revenue and profit growth has caused this paradigm shift, forcing companies to start considering service supply chain organizations as profit centers.
Do you manage your service supply chain in-house or this activity is outsourced?
According to a survey conducted by Tompkins on service supply chain, most organizations do not outsource this activity. Depending upon functional areas, the percentage of respondents outsourcing their service supply chain activities ranges between 15% and 40%. Corporations need to determine whether or not service supply chain related functions are part of their core competency or if they’d like to develop them as a core competency. If the answer is no, they need to consider outsourcing these activities instead of using forward supply chain organization for execution.
How do you go about selecting a service provider?
Most organizations use corporate procurement groups to select a service provider for their service supply chain. In many cases, an organization’s unique requirements can only be met by a limited number of service providers in the marketplace, who may not be in an approved vendor list. An organization’s inability to identify the right long term partner could result in a decrease in profits, an increase in cost, a decrease in customer satisfaction and many other undesirable consequences. Therefore, selecting a service provider which is right for you could be the difference between a satisfied customer and a delighted customer.
If this activity is in-house, do you have metrics to measure the effectiveness of your service supply chain? If yes, then are they the same metrics used by your peers and competitors?
A benchmarking exercise could be very helpful for organizations to understand industry measurement and current positioning with their peers and competitors. This will also help highlight the areas of focus for improvement.
If your service supply chain is outsourced, how do you measure your supplier performance? What are your incentives for the supplier to perform better?
A benchmarking exercise could be very helpful for organizations to understand industry measurement and current positioning with their peers and competitors. This will also help highlight the areas of focus for improvement.
How do you learn about best practices in the industry and implement them as applicable?
The Supply Chain Consortium is constantly working to gather valuable data on service supply chain benchmarks and various best practices.
How do you learn and implement the best practices from other industries which could be applicable to your business and give you the competitive advantage?
Most organizations do not have a formal process to address this. Supply Chain Consortium could help identify best practices which could be applicable and transferable to client industry. Tompkins team could help implement them to realize benefits.
How often do you review your service supply chain practices and validate your assumptions?
Most organizations do not have a formal process to address this.
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