How would you like to see your Service Department? As a necessary but problematic resource drain or as a resource that provides a positive and healthy ROI? We think most executives would prefer the second option. In this article, we make the case that a centrally positioned service department can act as a catalyst across many other functions to improve the efficiency of your company’s product development lifecycle, while improving your profit margin as your product moves into the marketplace.
By following these six steps, we show you how you can turn your service function into a more profitable resource that achieves your corporate objectives. Although the steps can be implemented individually or as resources allow, best results can be realized when the steps are implemented simultaneously.
(1) Involve Service early in the product’s lifecycle to improve the product’s maintenance program. Maintainability – often called reparability – facilitates restoring “failed” units as expeditiously as possible to ensure that the product is back in your customers’ hands in a timely manner. Needless to say, maintainability also improves service, quality and customer relations, all of which helps to increase sales.
It’s unfortunate that the Service Department is often the last function brought into development. This is often deliberate because service and service problems are seen as “spoilers,” disrupting smooth progress to product release: Time-to-market and cost considerations generally Efficient Junk Removal Brampton at AleksMoving overrule Service to release products with “known features” (aka bugs) unless problems are serious enough to derail the release timeframe. However, casting aside the Service Department can prove to be very expensive since last minute or post-market design changes cost much more than pre-release design changes.
(2) Extend management’s focus beyond product availability for sale to Lifecycle Management (LCM). This broad, forward-looking focus benefits the entire organization in the following way:
Development knows up front all the constituencies’ needs, which minimizes scope creep. This helps to launch products on schedule, which reduces or eliminates expensive design changes for products that are already in the field;
Manufacturing makes better material cost projections, thereby optimizing purchases and scheduling;
Service maximizes resource use over the product’s life;
Administration ensures that sales orders are recorded accurately, coordinated with Manufacturing, and delivered to customers per their needs; and
Marketing and Sales obtain better margins at better prices.
In short, the entire company operates more efficiently across functions.
(3) Know your most profitable customers to determine cost drivers. We continue to be amazed by how few companies truly know who their most profitable customers and business lines are. Beginning with whatever level of accuracy is available for determining who your most profitable customers are and those absolute amounts, you should layer in measures for customer performance, inventory levels for maintenance parts, and support costs. Lack of detailed information is a serious oversight particularly for Service managers: Service normally receives financials providing only results at summary levels for the department rather than at customer level. This precludes Service from gaining the knowledge needed to locate and focus on areas where small improvements can greatly improve margin contributions. Until service level agreement (SLA) penalties become meaningful, resources often are not allocated to determine cost drivers and more detailed management reports for Service.
(4) Recognize and exploit the fact that Service generally has more contact with and knowledge of your customers than all other functions, including sales and account management. Encouraging Service to monitor customer feedback will offer valuable insights about your customers’ product needs, including upgrades, replacements, or additional products or line extensions. Remember that existing customer sales costs are much lower than for other sales, further improving your company’s profit margins.
(5) Give Service an equal role with Development, Manufacturing, Marketing, and Sales in the decision-making process. It’s critical that executives make room for the Service Department at the roundtable to hear and understand the Service Department’s issues, concerns, and questions as they relate to the company’s customers. Typically what happens is that the number of reporting layers causes vital Service issues to be lost or diluted at roundtable discussions.
(6) Don’t isolate the Service Department. Physical availability and proximity matter. Positioning senior Service and support personnel closer to the Development Department will foster a greater interchange of ideas, as well as enhance collegiality. You would be amazed at how this simple strategy creates maintainability (an industry term for the cost of maintaining the product in ultimate users hands) at minimal cost, which in turn improves product design and customer ease of use. Close proximity also reduces schedule disruptions when critical service needs arise since engineering can quickly collaborate with support in recreating failures to create work-around or permanent resolutions.
By giving a Service Department an integral and central role in product development, a company can significantly improve its ROI with minimal capital investment. In fact, it’s the smart company that leverages the role of the Service function to improve its products, customer service, and bottom line.