3 ways to save money by reducing field service inventory

This field service management blog post is brought to you by IFS’s Vice President of Research and Development, Tom Bowe.

Most service companies track inventory in the field to some degree and most can report cost variances and usage trends each month. Occasionally I run across service businesses that expense all of their field inventory, but most track at least their highest cost items with some care. Few have real-time visibility and closed-loop logistics, which is essential to eliminating surplus stock, recouping warranty reimbursements, reducing shrinkage and uncovering hidden costs.

Service parts management is complex and difficult to understand, let alone fix, with a lot of people involved across multiple departments. However, its impact on cash-flow and profitability causes service executives to spend a significant amount of time white-boarding, analyzing and brainstorming ways to optimize field inventory. When the normal process fails (i.e. stock out, urgent, NFO, hard down, etc.), split-second decisions often have a negative, cascading effect on service levels, first time fill rates, customer satisfaction, and cost.

Here are three suggestions that make for a better running service logistics organization:

1. Closely track the number of parts requested vs. the number of parts used to fix each customer problem.
   It used to be difficult to link these transactions together because they occur at different times; different places and can involve different systems. But now, Metrix (for example) can require technicians to disposition each part that was shipped, pulled, installed, repaired, tested or swapped before they can close the call.
2. Implement periodic cycle-counting in the field.
   This used to be tedious, but now it’s easy to automate and requires little user effort or training with intelligent barcode scanning. Service part cycle-counting has a number of advantages over traditional physical counts, especially if the field doesn’t see it as a waste of time and frequency is based on value, like ABC.
3. Enforce approved stock lists and levels.
   Ideally, on-hand inventory in a service van or a technician’s trunk consists of low-cost/ high-use parts and essential tools…that’s it. Everything else is delivered on-demand, purchased as needed, or consigned to customers and parts are consumed or returned immediately.

Sometimes it’s best to manage these critical service parts functions in your service systems. Traditional supply chain systems don’t account for the nuances of managing service parts, and are often times are too complex for the job. Good forward and reverse logistics management is a key driver of customer satisfaction and overall service profitability. We think closed-loop service parts and logistics should be a core component of all field service automation projects.