If you are responsible for global distribution of critical spare parts to minimize downtime on your company’s installed equipment, you know it’s no easy task. Distribution networks could stretch across hundreds of locations in multiple continents, with “order-to-delivery” service-level agreements that range from 2 hours to several days. This article explores the challenges of managing service parts logistics and the importance of having a highly flexible 3PL partner.
The Challenge of Critical Spare Parts Distribution
Supporting global delivery of spare parts is a logistical challenge that can even influence the level of after-sales support technology companies are willing to offer. A 4-hour service level probably means you need a parts depot within 100 kilometers of each piece of installed equipment. That’s a lot of stocking locations, a lot of inventory, and a lot of overhead that must be covered by the cost of the after-sale service agreement.
Is that a cost that customers are willing to pay?
Clearly, for many suppliers of mission-critical equipment, after-sales support is an essential service they must provide. It’s these companies that Dimerco serves through our Service Parts Logistics solution.
In the last 5 years, we’ve noticed companies pulling back from 2- and 4-hour service levels and opting for next-day service (early morning). This seems to satisfy the majority of suppliers. For operations like data centers that need to almost eliminate downtime, they often keep critical spares on site, negating the need for a nearby depot.
For suppliers that do require a distribution network for critical spare parts, the next challenge is finding a third-party logistics partner (3PL) to help. Most 3PLs can’t or won’t support this type of business. A few reasons:
- It takes considerable work to recruit and manage quality courier partners across dozens or hundreds of worldwide locations. The work is important and difficult, requiring 24/7 availability to process the orders centrally and then deliver to the on-site technician. The work is also infrequent, making it hard to find local partners willing to provide round-the-clock service on an as-needed basis.
- Some 3PLs can’t handle the systems challenge of managing inventory and providing customer visibility across a globally distributed spare parts network.
- The work may require service beyond just basic delivery, which could be beyond the scope of local couriers. For instance, Dimerco manages a project that requires the local depot to inspect components that were removed from installed equipment and upload software onto otherwise working units to put them back into circulation. Partners that can do this type of work, and do it well, are hard to find.
The good news is there are 3PLs that have global service parts logistics as a strategic focus.
Flexibility is a Key 3PL Requirement for Critical Spare Parts Distribution
Logistics is not the core business of the large, technology suppliers that require distribution networks for critical spare parts. So it’s no surprise most are not interested in directly contracting with dozens or hundreds of local providers. A relationship with one or more service parts logistics specialists eases this administration burden and puts global spare parts distribution into the hands of experts who have established relationships and networks in place.
One of the key characteristics to look for in such providers is flexibility. Each after-sale service requirement is different and you want partners that can quickly adapt to different assignments and changes to existing programs.
Following is a summary of a few very varied solutions from among Dimerco’s service logistics customers. Are any of these examples similar to your own requirements?
Global manufacturer of networking equipment
This company requires 4-hour delivery of critical spares around the world. The company came to Dimerco because its existing partner was struggling to support installed locations in difficult-to-serve countries in Eastern Europe and Asia – from Kazakhstan and Jordan to Morocco and Pakistan. We handle the parts delivery and the processing of the defective or unused parts, including certificates of destruction for parts that are scrapped. Dimerco manages a large network of courier partners for this customer. Despite the fact that local inventory sits on many different systems, Dimerco gives the customer a single view of inventory across all locations, working closely with local partners to reconcile inventory and making that information available via a web portal. Specific information on when a part ships and POD data are fed directly from Dimerco into the customer’s system so its team can monitor each order’s progress.
Global manufacturer of cybersecurity products
For this supplier, Dimerco is expanding service parts distribution from Southeast Asia into Australia. Currently, Dimerco provides expedited air freight service from Taiwan to all of Southeast Asia for next-day receipt. At the company’s request, we are establishing another location in Australia in Melbourne. That will give them one-day ground service to nearby cities like Sydney, with the option of ground or Next Flight Out service for Perth and other more distant cities. This supplier also requires that our locations perform a triage process on returned equipment to see if can be repackaged and go back into inventory. We essentially verify that the product looks like new and then load all the latest software and firmware before packaging it for resale.
Diversified manufacture of large industrial equipment
One of this company’s products is a machine used to create flat, rolled steel. The equipment is used in steel mills throughout the world, which must have quick access to replacement parts should a machine break. This supplier does not have after-sale service contracts with customers but wanted to establish a network to get parts on site in a day or two. Dimerco created three global stocking locations – one in Florida (for distribution to North and South America), one in Amsterdam (for distribution throughout Europe) and one in South Korea (for distribution throughout Asia). These central stocking locations provide an economical solution that also meets the needs of end customers.
Managing Inventory and Visibility
One of the challenges of managing critical spare parts networks that utilize different local couriers is inventory management. Companies need to be confident that they have enough of the right parts in each location. They also want high confidence that parts won’t be lost. To address this concern, Dimerco works with local partners to conduct regular cycle counts that reconcile local inventory with central inventory records. For one customer, we cycle count the full inventory 4 times a year. Customers use this data to manage replenishment and to move parts between locations in the network to ensure adequate numbers of each SKU are available.
Look for a 3PL partner capable of maintaining high inventory accuracy levels. Beyond that, the 3PL should offer a web portal that allows you to drill down to examine inventory by location, anywhere in the world, down to the serial number level.
When it comes to delivery of critical spares, suppliers are very anxious to have visibility to shipment details like shipment time and expected ETA. Vet 3PL partners carefully in this area as many will rely on manual updates that often lag behind the actual delivery timeline.
In some cases, Dimerco will provide local depot partners with scanning devices that have all orders loaded in. When workers highlight the order and scan the product details during the picking process, this updates the Dimerco system directly. The updated data is then transmitted directly to the supplier’s own system, where an alert is triggered.
3PL Distribution of Critical Spare Parts: Focus and Flexibility are Key
Critical spare parts delivery is about providing technology-aided solutions for highly sophisticated technology products. But success is less about technology and more about managing strong relationships. Since execution is typically performed by independent local providers, it’s essential to recruit, train and manage providers that can get the job done.
With this in mind, the right choice may be to partner with a 3PL, like Dimerco, that has already built a strong global network of competent local partners, particularly across Asia, Europe and North America. An experienced 3PL with a strategic focus on service parts logistics can offer solutions to a wide range of service-level needs. To discuss your specific needs for distribution of critical spare parts, talk to a Dimerco specialist.