Worst in Class – How not to run a service supply chain

A few years back (well before Stu Reed took over as President of Home Services), my wife and I bought a dishwasher at Sears. The theory was that Sears is solid, trustworthy and conveniently located close to our home, meaning we would have a reliable appliance and, if necessary, quick and effective service. However, when theory met practice, we ended up with the ultimate story of failure in service supply chain.

How bad can it get?

First, the machine broke. Then, following eight service visits, all unsuccessful, my wife wrote an old-fashioned snail mail letter in the hope of stopping the pain. To quote this correspondence exactly:

“Today at 5:25pm, I spoke to an operator who text-messaged the cancellation. He then transferred my call to someone to discuss cancelling the cheque I wrote for $213.82. That person forwarded me to another person who then put me on hold. I was cut off and told by a recorded message system to call back again.

Since I have spoken with six Sears people yesterday, four earlier today and three more just now attempting to cancel this order, I do not think calling back again would be effective.

I will not be doing business with Sears again.”

We were out a few hundred dollars and I’m pretty sure Sears blew some money on all that wasted effort. Ouch.

How good should it be?

SCM World has just run a fairly comprehensive field study on service supply chains and found that service is beginning to shift away from being treated as a customer entitlement managed as a cost centre and towards a much more strategic role. Only 18% of all respondents classified the primary role of service supply chain as a “cost centre” while two thirds see it more as a strategic enabler and as a competitive differentiator. This is promising news.

Even more interesting is the bias among senior executives in favour of service as a strategic weapon compared to the views of middle management. It seems top executives grasp the full lifecycle of business profitability and are trying to get their aftermarket operations tied in to the wider business. My Sears story is the exact opposite of what should happen, and senior leaders clearly get this.

Service should also make money

The perception of service supply chains is certainly changing; unfortunately, most companies seem to have made only part of the journey so far. We asked how well aligned aftermarket operations are with other business functions and found generally strong links with essential execution activities like logistics, operations and quality. This is good news for end customers who are far more likely to get their service problems fixed quickly than in the past but, taken alone, it won’t contribute to better margins.

One vital missing link is between aftermarket operations and marketing. Given the importance of customer satisfaction and considering the now enormous role of social media as an influence on purchase decisions, particularly for high tech products, it seems crazy that only 13% of our respondents say aftermarket operations are completely aligned with marketing. Three times as many people say their service operations are completely aligned with logistics, for instance. Mistakes may be far fewer these days but no one is telling the story, which means one squeaky wheel can do a lot of damage to market perceptions of quality and reliability.

The other missing link is worse. Only 16% of all respondents said that aftermarket operations were completely aligned to engineering. This means lessons learned in the field are too rarely being baked into the next generation of these long-life products. Not only can a design-for-service programme cut failure rates in use, but it can also reduce spares inventory levels, time and labour in repair and, with remote diagnostics, possibly avoid service calls altogether.

Service supply chains have come a long way in terms of keeping the customer happy, but until marketing organisations start measuring and reporting these successes and engineering groups start learning from their mistakes, many will find their cost centre past coming back to haunt them.

P.S. Our community-wide Chief Supply Chain Officer survey for 2013 closes next Friday 6th September so, if you’ve not participated already, we’d greatly appreciate your input into our flagship study of the year. Take the survey here. Thank you in advance.