Service, the key to survival – Part 2

Welcome to the second in our series of articles, on Service – the key to survival.

I guess some of you believe this is a rather dramatic way of expressing the transformation to service orientation. But taking into consideration the efforts and time required to reach full maturity in this field, it is hardly worth it if you do not have full conviction and complete engagement and consequently not fully aware of the risks and rewards this can generate.

Managing the transformation journey that manufacturing companies navigate through to become more Service-oriented is vital to developing a sustainable Service business, complementary to an existing product portfolio. In some cases, even critical to survival when traditional products gradually become commoditised.

Ensuring an ‘all-encompassing’ Service leadership, tailored Organisational structure and capabilities, as well as an overall company direction that takes ownership of the Service agenda, is a must.

It is now time to look at Operations & Delivery

(If you haven’t already, please do read the first part of the series covering the all important Sales and Marketing function before you begin)

‘Ensure successful delivery of sales contract’

Once your Customer has signed the service sales contract, being an ad-hoc product or a more long-term commitment, the expectation on accurate and swift delivery takes front seat and your customer interface shifts from product and commercial experts to project, supply and technical experts. In this focus area, we include five different areas critical to delivering visible change to your clients and their operations; 1st line customer support; Field service management; Supply chain management; Project management and Engineering and Technical support.

1st line Customer support

Anyone who has experienced the frustration and helplessness when not taken seriously in the case of need, urgent or not, knows how insignificant you can feel when trying to find that one person who really cares and knows what he or she is doing, the portal of help where availability, interest and capability are overwhelmingly impressive. When you are in the midst of an operational emergency or interruption of some kind where time is really money, all you need to hear is a simple: “Don’t worry dear customer, we will handle it!”

The careful balancing act of dealing with an upset customer and managing their expectations could be the best marketing tool and trust builder you can ever wish for. Conversely, it could also be disastrous if you fail to take the necessary steps to provide internal efficiency and process execution coupled with a professional and humble communication with the affected client.

In this context it is difficult or even impossible to try and spontaneously solve the issue, inventing a quick fix which requires everyone in your team to take this customer call equally seriously, everyone is busy, right?

It is, in other words, critical to have all the main steps of an issue resolution process defined and implemented up front. In the initial stages, the root cause of the emergency is often unknown, but the effect of it is clearly visible. It can, therefore, be tempting to start promising solutions and actions upfront, both to buy time and to try and handle an upset customer. Unless this is a repeat problem where the solution has been provided previously, this approach can prove counterproductive and have devastating consequences to your customer relationship. The best way to deal with ongoing issues is almost like dealing with a journalist who is quickly trying to establish a guilty party, to capture a good story. One has to tread carefully and keeping one crucial thing in mind all the time, the best person to respond to this problem is you, and no one has the same reach and insight to deal with it than you. This gives you an upside and coupled with honest, fact-based and proactive communication the clients will eventually feel they are in good hands.

Above is assuming an emergency situation but if the call is about wanting a piece of information or a missing spare part or even a request for a meeting or a courteous visit, the urgency and sensitivity of the matter is reduced. But at the end of the day being the interface between the customer staff and you as the supplier, if you can deliver on expectations, you have one of the keys to a successful service business.

Field Service Management

How many times have you heard that the most important person in the company is the service engineer? The person that interacts with the client more than anyone else in the company and as a technical and ‘non-political’ person has the ears of the customer like no-one else. This is potentially true, but additionally, it is without comparison the most impactful role when it comes to executing the services agenda.

So, who is the Field Service Engineer (FSE) and what constitutes a successful FSE profile? We typically provide an illustration where the FSE is positioned as a person half dressed in overalls and half in a suit, implying that not only are they expected to know their technical stuff, they are also an inroad of new sales opportunities thanks to the unparalleled insight into customer operations. This scenario could be a deliberate strategy or plainly a wish from management that they can convert everything they hear into a business opportunity. In any case, the role and the expertise are complementary to that of the development engineers who sometimes lack deep customer insight when designing engineering solutions as well as to that of the sales engineers that require the true picture of a site, operation and/or equipment.

What are some of the key success factors with regards to the FSE team? It can be expressed as simply as the right quality and right quantity. Sufficient FSEs to perform all tasks and sufficient capabilities to represent the equipment sold and the ability to handle most if not all technical challenges. Well, if we elaborate on this a little, it is fair to say, I wish it were that simple. Sufficient FSEs probably cost too much and cannot be achieved, and sufficient quality requires a selection of different levels of expertise as the capabilities are proportionate to the motivation of the FSE to do a good job. In other words, you must have a long-term plan both when it comes to hiring and developing skills.

As the field service manager, you have in other words quite a task to bridge the customer expectations, internal constraints and FSE motivational drivers into a team of complementary capabilities, one that has to be one step ahead of the client and one that can manage the different career paths of what starts off as a technical expert.

A motivated and capable team of FSE’s is without a doubt one of the strongest bridges between yours and your customers’ successful businesses.

Supply Chain Management

The most basic but also the most revenue generating service product in manufacturing companies is spare parts. It represents large volumes, is typically very frequent and transactional and due to its relatively high cost measured as part of a customer’s operational costs, it is also a sensitive matter in terms of supply/availability. Few topics within a service organisation are charged with such high levels of expectations and ambiguity.

So how do we ensure a win-win situation between the clients and their ambition to reduce operational cost and the suppliers and their ambition to safeguard the healthy and necessary revenue from spare parts?

As so often it starts by understanding the customers’ operational cost, how to capture all the drivers and how to analyse and communicate this in an understandable way to a customer. This will allow you to discuss parts consumption and parts ordering with the right level of transparency and with the right perspective on where and how improvements can be found.

As an example, and one that often causes disagreement between customers and suppliers is what and where to stock the parts. A customer typically wants the parts nearby, preferably on site for fast and ease of access and a supplier wants to consolidate and centralize with the argument that the more items we can store in one place the better the availability but without the capital cost directly affecting individual customers. The main disadvantage of a centralised store, seen from a customers’ perspective is a possible slow delivery or reduced service levels due to the distance to the operational site. This dilemma can be bridged, however, by looking at a few important areas.

1) Planning – the longer notice you can give of parts order the easier to fulfil ‘on time in full’.

2) Good maintenance routines – will act as preventing surprises and reactive parts ordering

3) Data – knowing the real consumption, by customer, site and machine, it is possible to compare and work with best practices and shared learnings

4) Pricing – sold item by item or in a bundle or even as part of an overall performance agreement can provide many interesting alternatives to reducing customer operational costs.

There are of course many more critical areas to an efficient and effective parts supply chain and is often subject to senior leadership taking control and, in some cases, integrating with other supply activities within an organisation as the synergies between different types of supply are seen as greater than the synergies with service.

Other important areas covered under supply chain are, for example, consumables such as glue, soap and oil and service products such as upgrades, rotation-units and tools. In general, one can say that all services are delivered through a supply chain whether it is hardware as mentioned previously or software such as training, consultancy, maintenance contracts and so on. These areas experience more irregular ordering behaviour than parts, and from a supply chain point of view, far less frequent in volume and are generally tailored for each occasion and order. This offers another dimension to a supply chain albeit equally important to handle professionally and always with OTIF (on time in full) as the main driver.

Insight into Customers Operational Costs (COC) or Total Cost of Ownership (TCO) is key to everything you do as a service organisation and even as a company. An effective supply chain will show that you sincerely respect your customers and their invested money.

Project Management

What is a project? – a set of activities run under one banner with a clearly defined output, milestones and a set timeline. It is run by a project leader and has a beginning and an end. In other words, a project cannot go on forever, then it is either suffering from weak or continuously changing specifications.

Project Management (PM) is an activity applicable in all possible situations but is run following a similar process. We do not intend to enter into the nitty-gritty of project management in this chapter as the practice is showered with detailed definitions, tools, training courses, certification programs, etc. and is a profession in its own right.

Progression and ultimately the success of a project is traditionally measured in the three dimensions cost, quality and time, where all three is a function of the other two. It is well known that the further down the road the project has evolved, the more costly any changes to the project (specification) will become.

So where does PM come into play in running a service business. Well, as the category operations and delivery chapter implies, it is all about executing and in most cases bringing the service solution or the service product to the customer. But it can also be providing project management to the installation of equipment, sold by your company and in doing so indirectly contributing to new service opportunities as more equipment suggests increased installed base. The revenue generated by the PM of equipment is normally not allocated to the service business and is primarily a breakeven activity (cost recovery) hence indirectly rather than directly impacting the service business.

Successful project management and the consequent successful unveiling of your new services is one of the best inroads to a long-lasting customer relationship.

Engineering & Technical support

When time is of essence and delays in solving a problem short-term as well as long-term, you will not be surprised to know that many organisations struggle to impress on customers looking for professional support. This area works with the prevention of issues taking proactive steps towards avoiding operational interruption but more commonly, the team is often the last outpost to technical challenges in the field and consequently house some of the brightest and best technical minds in the service organisation.

When faced with complex technical issues on customer site, the approach is typically divided into different individual stages, each making the most to minimize customer impact.

1st stage – Recognize and understand, 2nd stage – Contain and manage, 3rd stage –Eradicate and prevent reoccurrence and throughout all three of them, communicate, communicate, communicate!

To break this down into further details whilst observing the different stages with complete customer orientation, it can look as follows:

The 1st stage focuses on asking questions, setting the scene how quickly you will get a grip of the situation and consequently how accurately you can estimate the timing and immediate actions. There are many different ways to run root cause analysis, but the outcome of your initial inquiries must be a good enough understanding of the situation to be able to take some critical decisions.

The 2nd stage is aiming to resume production/operations even if this is done in a temporary way. In other words, it is less costly at this stage not to fully eradicate the problem but to contain the problem, and while carefully monitoring the production you can potentially retrieve more information about the situation and test different ideas in-house before releasing a tailored solution that will satisfy all stakeholders. You might also have a readily available solution directly applicable to this particular scenario, and if so, this will be immediately deployed.

The 3rd stage where all focus is on eradicating the problem and ensuring this interference is not reoccurring again. This will include a deeper analysis and cross-referencing with similar cases and so on. It is potentially about a machine redesign or an upgrade and above all a strong focus on communication, internally to ensure key players are fully aware and focused on how they can contribute and externally, to ensure the clients are fully convinced that you are taking this issue seriously enough to make them feel they are in good hands.

Typical KPIs to use in this process are Time to Resolution and Times of Reoccurrence. These KPIs clearly indicate how effective your process is and how able you are to close an issue once and for all. Reoccurring problems are from a client’s perspective some of the worst indicators you can have revealing that you do not have full control of either the product you are selling or the application of it in its intended environment.

Operations and Delivery are characterised as where the ‘rubber hits the road’. This is where your sales efforts really become visible, and this is where you show that you can create a win-win situation based on a thorough understanding of your customers.

Dag Grönevik

Founder and Partner Service Leaders Matters

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