Enterprise Service Management: The Key to Service Excellence
Over the past 20 years, companies in practically every industry have seen significant productivity improvements from the implementation of business systems. In the 1980s, ERP, then SCM, revolutionized factory and distribution planning systems. The aim was to achieve maximum throughput and optimum fulfillment across the supply chain, from product development, through manufacturing, to sales. Investment in these systems was rewarded with massive productivity gains. Yet, often, the focus was strictly on front-end processes; customer acquisition and retention were neglected. This led to the complementary development of CRM.
In spite of these gains, the after-sales service arena has remained a neglected part of the organization. It often is viewed as a necessary evil, a cost center, and certainly not a profit center. Granted, components of today's CRM solutions provide effective call management and customer response systems, and some SCM solutions are exploring the addition of service functionality. However, they both fall short of addressing the actual delivery of after-sales services. So, although a company can now deliver goods just-in-time, they often fail to deliver services as effectively. Accenture and Xelus address this overlooked area through enterprise service management, which encompasses the end-to-end focus required to deliver service excellence.
What Is Enterprise Service Management?
Enterprise service management (ESM) is a comprehensive approach to managing after-sales service and enables many companies to turn their service organizations into profit centers. It is the natural extension of ERP, SCM, and CRM, and comprises the complete set of collaborative, cross-enterprise processes required to plan and deliver service. ESM provides the tools to optimize the service operation while minimizing cost and maximizing service delivery.
Enterprise service management starts with a review of organizational processes, from product design to ongoing service requirements. Assessing the level of service that is delivered to the customer is also necessary. Successful organizations have found that by adopting a balanced scorecard approach for example, by measuring product availability, up-time, and first-time fix-rate they can manage and improve this area of the business.
The ESM model is particularly relevant in the high-tech business environment, which is characterized by frequent product launches, increasing price competition, proliferating product variants, and increasing product complexity. ESM also has produced significant benefits for companies in telecom, aviation, defense, energy, and surface transportation.
As product lifecycles shorten, there are a growing number of older versions of products still in existence that require service. Savvy companies are addressing these disadvantages at the design stage by designing products and procuring parts with ease of service in mind. Designing for service results in an increased use of modular designs and customer-replaceable units, which allows for easier and more efficient repairs. These replaceable units are clearly labeled, easily removed, clean, and robust, and can be located with relative ease by the customer.
Optimizing the Use of Customer Support Channels
ESM dovetails well with CRM because it operates best when combined with an effective suite of customer-support channels, including an Internet self-help site, customer call centers, and a team of service engineers. The costs for providing these various forms of customer interaction widely vary from a few cents to hundreds of dollars. For example, research has shown that providing an effective Web-enabled self-help service can be less than one percent of the cost of providing an on-site service engineer (Figure 1). Therefore, to maximize profits, the new service enterprise must try to use the least expensive customer channels without compromising customer satisfaction.
Figure 1 - Products-based companies can gain new profit opportunities by providing post-sales service.
One way of dramatically reducing service costs is by developing a structured approach to preventative maintenance, including automatically recording usage and running hours. Wireless technology companies are designing smart products that self-diagnose impending or real-time problems and relay this information back to both the customer and the service centers for swift resolution.
Field Engineer Effectiveness
While Internet service channels and remote support facilities will reduce the need for face-to-face customer interaction, the role of the field service engineer is not redundant. With ESM, it is essential that service organizations retain the capability to rapidly and cost effectively mobilize field service engineers. They must be armed with the right knowledge, skills, and parts to accomplish a first-time fix a prerequisite for the new service imperative that ensures customer satisfaction and minimizes the cost of a return visit.
To maximize on-site service effectiveness, leading organizations are equipping their technicians with hand-held Internet devices. These PDAs give engineers speedy access to service history, drawings, parts availability, locations, ordering facilities, and company experts for advice. The more astute organizations in this arena are relaying the customer feedback to the product development, marketing, and sales departments. The PDAs also can be used to assess job status (and, therefore, field engineer availability) so that effective service schedules can be built.
The benefits technology can bring to the service level a customer receives are widely emphasized, but a successful end result also requires a motivated and suitably skilled field engineer one who understands the company's service philosophy.
Software Choices Expand
Choices for Web-based, ESM software are growing, but service enterprise optimization can be far more complex than picking the right technology. The type of optimization inherent in service management is more difficult than managing the linear processes of the manufacturing supply chain.
The service network involves multiple supply and demand streams. Parts are sent to numerous service sites as well as through the reverse logistics loop, which sends returned and damaged products back for servicing. Matching the right part with the right service personnel in the right place at the right time without incurring excessive cost requires the consideration of numerous factors. These range from part failure predictions, part inventory stocks and locations, and service level commitments, right through to workforce skills and scheduling. Fortunately, the emerging ESM tools are capable of managing these complex challenges to optimize the entire service enterprise.
Gaining Competitive Advantage
At no time has it been more important for an organization to achieve excellence in its interaction with customers than today. Consumers have become more knowledgeable and are more demanding of immediate satisfaction. They are also more fickle and less forgiving, with loyalties readily forgotten if current demands are not met. And, in a world in which profit margins have been squeezed to the limit, many companies are realizing that delivering service excellence can become the market differentiator.
Adopting the ESM model helps to improve response times, increase first-time fix rates, and ensure successful service delivery. In return, better service creates an immediate competitive advantage that can increase sales as well as build long-term customer loyalty. Recent studies indicate that a customer is more likely to be loyal after experiencing the positive resolution of a problem than if there was no problem at all.
Service that was previously acceptable now barely reaches the minimum standards; it is evident that continuous improvement is essential. Leading manufacturers have already recognized the sizable profit implications of service excellence. Some are actually generating more profit from the provision of service than from selling the original product. Other organizations have taken this one step further and are selling the finished goods at a loss in order to ensure the recurring revenue and profit streams inherent in a successful long-term service contract. In these cases, service is an integral part of the product's profit margin.
Including service in the sales package is a practice that is spreading through many industries. For example, photocopier purchasers are now looking to photocopier suppliers to deliver a comprehensive service offering. Similarly, organizations procuring aircraft are now seeking lifetime support service models or are only paying for the hours that the aircraft is actually in use. For companies reacting to the new service demands, the route to maximizing profit lies in adopting the ESM techniques outlined thus far. It is inevitable that product parts will wear and break. The more expensive and critical the part, the more important excellence in service delivery becomes.
The ESM Value Proposition
ESM generates value in a variety of ways, and can directly impact revenue growth. Providing several customer-support channels teamed with better coordination of parts, service engineers, repairs, and returns results in better service and greater customer satisfaction. A more loyal customer is likely to make additional purchases without seeking out the competition.
Service parts inventory can be a major expense for any company. With potentially hundreds of field service engineers in numerous locations, the scope for overstocking is a very real problem. Yet, not having the right part in the right place at the right time can fundamentally erode the service offering. Fortunately, by improving parts planning efficiency and service parts allocation, and incorporating improved failure analysis and prediction, the ESM model and the tools it employs can reduce inventory levels and carrying costs while maintaining or improving service levels. ESM can also help reduce inventory on a global scale. This strategy provides enterprise-wide visibility through Web-based solutions to make global service management a viable option.
Achieving service excellence through the employment of the ESM model also helps maximize asset utilization. In industries such as consumer airlines and utilities, where equipment downtime can be extremely costly and often incurs hefty penalties, optimizing service (with the subsequent reduction in downtime) can have a significant effect on the bottom line.
One of the significant benefits of ESM is the flexibility it allows each company to balance service levels, cost, and infrastructure to match its business goals and objectives. Therefore operators, such as airlines, can reduce costs without jeopardizing the high levels of safety and service fundamental to the existence of their business. Third-party service providers can also use the ESM methods to offer service contracts that are more competitive and also more profitable a win/win situation.
A final benefit of the ESM model is its potential to deliver much of this value quickly usually faster than the complementary solutions of ERP, SCM, and CRM. In the long-term, the improved customer loyalty enabled by service excellence often leads to competitive advantage.
Conclusion
There is no doubt that investment in ERP, SCM, and CRM solutions has generated billions of dollars in savings over the last 20 years, or that companies are now looking to realize gains in the previously neglected service areas to increase profits and market competitiveness. Many organizations are realizing that the loyalty resulting from good service is key to both customer retention and future business and that, in some cases, they can derive more profit from service excellence than from the sale of the original products. Some companies are even selling their finished goods for zero profit or at a loss to gain recurring profitability through future service.
With this new emphasis on service excellence, the entire process of after-sales service is being redefined. It is no longer viewed as a single business function, but rather as a web of processes that complement and integrate with other established business systems. ESM encourages the use of Web-enabled customer self-help channels as an effective and, if possible, preferable means of resolving service issues. It aids customers in the resolution of problems by designing products with ease of service. It also combines the effective use of information with supporting operations, ensuring efficient logistics and reverse logistics operations. It is a holistic approach to the service enterprise, combining a new organizational philosophy with improved technology.
Enterprise service management provides the model and tools to excel in the service area, maximizing the customer experience while optimizing the cost. Businesses are therefore beginning to realize that focusing on service excellence may provide the edge required to succeed in today's increasingly competitive and dynamic business environment.
