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With Aftermarket Services (AMS) rapidly becoming both a competitive differentiator and a growth mechanism, manufacturers would do well to shift to a service factory model, which can reduce service costs for AMS by 20% and increase service revenue by 25%.
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© 2014 Copyright Genpact. All Rights Reserved.
Achieving “services” business process excellence:Metrics-driven best practices and innovation
© 2014 Copyright Genpact. All Rights Reserved.
A Global Business Process Services Leader: Process Transformation and Outsourcing, Analytics, Technology
We help leaders of some of the largest enterprises transform and run their processes and operations, including the very complex and industry-specific
What we do
Unbiased, agile combination of process science, related technology and analytics limits upfront costs and enhances future adaptability
Right critical mass:
• we are large (64,000+ global staff) but our solutions appropriately flexible
• our top management is directly involved in our client partnerships
How we do it
Our impact
We help enterprises to be more competitive by becoming more intelligent: adaptive, innovative, globally effective and connected…
…by enabling tighter management of costs, risks, regulations, and supporting growth
The results: US$22B* of impact for 800+ global clients
© 2014 Copyright Genpact. All Rights Reserved.
Aftermarket Services: The “what,” “why,” and “how”
3
Service provided after the product purchase that is “devoted to supporting customers in the usage and disposal of goods”
“THE WHAT”CustomerSupport
CustomerSupport
Product/Technical Support
Product/Technical Support
Repairs and Maintenance
Repairs and Maintenance
Product-relatedServices
Product-relatedServices
“THE WHY”
Significant component of the economy Contributes 25% of revenues across U.S. manufacturers, and 40 to 50% of profits
May generate twice as much profit as sales of original products
Offers customers a continuous connection to the brand Can drive customer satisfaction and loyalty
Can facilitate continuous improvement of product design and quality
Can differentiate a company from its competitors
“THE HOW”
Perceived as a business network process, particularly when the service is carried out by different organizational partners
Third parties may provide services that are Complementary (e.g., field assistance, customer care), or
Competing (e.g., unauthorized sales and/or repair centers)
Organizational partners should be chosen to provide consistent service performance and the opportunity to control service output
Service provision has become very complex due to advancing technologies and diversified customer touch points and service delivery channels
© 2014 Copyright Genpact. All Rights Reserved.
Aftermarket Services: The value chain
4
• Contract
monitoring • Contract
renewals
• Contact
center• Product
support
/helpdesk
• Service parts
planning and
pricing• Parts fulfillment
support
• Field
service
support• Remote
monitoring
• Warranty
claims
processing• Warranty
supplier
recovery
• Operations
dashboard
and service /
cost analytics
• Installed base
management,
including IB
analytics
• Product
returns
support
Pro
cess
In
terv
enti
on
sV
alu
e D
rive
n
Service Growth Enablement
Service Execution SupportTransaction Processing
& Reporting
Setup & Planning
Service Request
Management
Warranty Management
Service Fulfilment
Parts Management
Service Invoicing & Reporting
Contract Management
Product Returns &
Refurbishing
• IB service
coverage %
• Cost per sale /
renewal• Contract
profitability
• Response
time• First call
resolution
• Remote
resolution %• FE utilization
• On-time
delivery• Back orders
• Cost of
reverse
logistics • Repair TAT
• Claim to
recovery TAT
• Analysis
accuracy
© 2014 Copyright Genpact. All Rights Reserved.
Did you know?
5
Centralizing the service support desk releases 20-25% of a field engineer’s capacity
Consolidation of field engineer dispatch and parts order teams drives 15% savings
Dynamic forecasting and accurate triaging of parts result in a further savings of up to 10%
Implementing contract pricing analytics helps identify key levers, resulting in 10% increase in revenue
Installed base analytics increases service coverage, resulting in 15% incremental revenue
LEVERS IMPACTING SERVICE COST
LEVERS IMPACTING SERVICE REVENUE
© 2014 Copyright Genpact. All Rights Reserved.
Summary of key learnings based on client engagements
6
Service Request Management
Setup & PlanningService
Request ManagementContract
Management
Service Fulfillment
Parts Order & Logistics
Service request creation on the correct installed product leads to faster issue resolution
Warranty Management
Service Invoicing & Reporting
Accurate contract coverage and entitlements details ensure adherence to contract terms and higher CSAT
N/A
Correct parts pricing information in the ERP results in accurate billing and dispute resolution
One-stop shop for the field admin support activities with correct and updated information impacts field utilization and service quality
Clearly detailed warranty coverage details help to avoid over- or under-billing due to lack of visibility
Accurate warranty coverage start and end dates produce faster claims processing and avoid billing disputes
Upgrading/removing “end of life” products and parts from the contract coverage reduces service costs and leads to faster request closure
Correct account details lower logistics cost and helps to avoid revenue leakage
Accurate details of parts (under warranty and contract) reduce missed billing opportunities and claims processing time
Correct reporting of all incidents leads to improvement in the quality of installed base data
Allocation of field engineer with correct skills ensures faster response and resolution time
Correct parts ordering eliminates the extra cost of transporting parts back and dispatching new ones
Upfront information to the customer avoids cases where a purchased order is required for that service as out-of-warranty coverage
Service request creation on correct customer IDs minimizes incorrect billing
© 2014 Copyright Genpact. All Rights Reserved.© 2014 Copyright Genpact. All Rights Reserved. 7
Parts ManagementWarranty
ManagementService Fulfilment
Service Fulfillment
Parts lead time and using preferred vendors, when adhered to, reduces inventory cost and parts fulfillment cycle time
Warranty Management
Service Invoicing & Reporting
N/A N/A
Correct shipment method used as per customer contract reduces shipment costs
Clearly defined workflows for the parts return process leads to faster parts return and supplier recovery
Clear information from the field engineer pertaining to customer abuse can result in unnecessary parts / product audit and reduce invalid warranty claims
Timely service closure documentation leads to faster service revenue realization
N/A
Analytics on claims processed can provide product improvement ideas and new sales opportunities
Insights and best practices for process interfaces drive $$ impact
Insights and best practices for process interfaces drive $$ impact
Summary of key learnings based on client engagements
© 2014 Copyright Genpact. All Rights Reserved.
Typically, 20%–25% of the service portfolio is below target margins and service revenue yield on the installed base is just 3-5%*
8
Service Cost can be reduced by ~20% by optimizing field operations, optimizing warranty payouts, and driving supplier recovery
People
Impact: $125 MM*
Parts
Impact: $75 MM*
Eff
icie
ncy
Eff
ecti
ven
ess
• Accurate triage of parts across regions and return processes can save 1-2%
• Dynamic forecasting and pooling of parts at warehouses can save 2-3 % of parts costs through lean inventory
• 10-15% of total warranty costs can be avoided by auditing 50% claims through an audit reasoning matrix
• Supplier warranty recoveries can increase by an additional 10-15% through effectively managing reverse logistics of parts under warranty
• Consolidating field engineer support and parts triaging teams saves ~15%
• Remote monitoring deployment reduces emergency dispatches by 30%, saving ~5%
Warranty
Impact: $50 MM*
Service Revenue can be improved 25% by enhancing contract coverage and increasing installed base yield
Capacity to Deliver
Impact: $150 MM*
Increase Contract Coverage
Impact: $150 MM*
• Installed base analytics increases service coverage, boosting incremental revenue by 15%
• Customer and product segmentation to identify potential customers
• Part and component level segmentation to expand service customer base
• Implementing contract pricing analytics helps identify key levers, resulting in ~10% incremental revenue
• Data-driven scientific inputs for pricing
• Accurate cost inputs
• Centralizing the service support desk frees up ~10% of field engineer capacity
Extract Contract
Value
Impact: $110 MM*
*For large manufacturing organizations
© 2014 Copyright Genpact. All Rights Reserved.
Challenges to achieving $$ impact
9
Lack of visibility into the installed base data
Low accuracy of the existing installed base (IB)
Growing market need to drive higher contract coverage
Lack of clarity in the “service products” (contracts)
…driving service revenue …optimizing service cost
Lack of visibility into Cost to Serve
Broken link between customer contact and service issue resolution
Lack of standardized processes
Significant parts availability/inventory issues and field service responsiveness issues
Unclear job allocation and handoffs
Lack of visibility into KPI/metrics to measure process efficiency and effectiveness
Key Industry Challenges In…Key Industry Challenges In…
© 2014 Copyright Genpact. All Rights Reserved.
Multiple missing links are an opportunity for value creation
Highly disaggregated
and broken processes,
leading to unclear handoffs
Service businesses financially
challenged by
Current economic environment and undercapitalized
scenario
Hyper-intense competition
among manufacturers and retailers
Standard process/IT tools
unavailable
Brands’ service organizations unable to commit and execute
service levels
Brands unable to drive Service Excellence and Customer Confidence
Result
Service Growth Enablement Service Execution SupportTransaction Processing and
Reporting
Setup & Planning
Service Request
Management
Warranty ClaimManagement
Parts Management
Service Fulfilment
Service Reporting &
Analytics
Contract Management
Returns & Recovery
XX X XX
10
© 2014 Copyright Genpact. All Rights Reserved.
A metrics-driven execution approach is needed
11
Efficiency Metrics
Effectiveness Metrics
Effectiveness Levers Affecting BOs
• Field response TAT• Parts OTIF
Service Execution:
Issue resolution
% Reduction of service requests on hold for parts
Improved productivity % Point-in-time savings
Improved resolution % Sustained savings growth
Integrated call field parts Process & Execution
• IB coverage• Contract profitability
Integrated IB and Contracts Process & Execution
Service Growth Enablement:: Contract and IB
expansion
• IB accuracy• Contract
Renewal/expansion Rate
Service requests requiring parts to complete transaction range from 28% to 73%; manufacturing industry median: 43%*
Effectiveness drives much bigger impact than efficiency Interplay of “smarter” processes, people, and technology is the key enabler
Service Factory: Integrated process and
execution
*Source: Blumberg Report
© 2014 Copyright Genpact. All Rights Reserved.
Building blocks of an executed innovation approach
12
Technology as a Key EnablerTechnology as a Key Enabler
Creating a Service Delivery Model Creating a Service Delivery Model
1
Centralize service support to impact service revenue and cost
Decouple similar processes and consolidate them
Establish a seamless linkage between customer contact and service issue resolution
2
Institutionalizing KPIs and Creating Next Generation Processes
Institutionalizing KPIs and Creating Next Generation Processes
3
Connect business-level KPIs to operational KPIs
Provide visibility into L2 and L3 process measurement metrics
Explore inter-linkages between business outcomes and process metrics
© 2014 Copyright Genpact. All Rights Reserved.
Intervention 1: Create a service delivery modelCentralized support platform: People and process
13
© 2014 Copyright Genpact. All Rights Reserved.
Decouple, consolidate, and centralize
14
Field ServiceField Service Parts ManagementParts Management
FE schedulingDispatch creation
Fieldrepair
Manage and track field parts
Parts ordering Tools sourcing
Manage field returns
FE debriefField admin & support tasks
Field service metrics reporting
Invoicing auditUpdate FE availability calendar
Parts logistics
Order receiptEstimate and promise delivery date
Orderentry
Follow-up for back orders
Shipment tracking
Parts returnsParts expediting
Global order triage
Parts planningScrap management
Field parts management
Centralized support platform
Apply Lean/Six Sigma principles
Establish link with local physical execution
Field admin time vs. wrench timeField admin time vs. wrench time Parts velocity vs. fulfillment support costsParts velocity vs. fulfillment support costs
© 2014 Copyright Genpact. All Rights Reserved.
Intervention 2: Technology as a key enabler
15
Tight integration of technology with
process and people
will drive “Realized Benefits”
Technology is outshining human collaboration and communication but
provides only “Potential Benefits”
PROCESS
TECHNOLOGY
PEOPLE
© 2014 Copyright Genpact. All Rights Reserved.
Intervention 3: Institute KPIs centrally and create next generation processes
16
ILLUSTRATIVE
Request to Repair (R2R) Business Outcomes: Cost of Service Service Revenue Customer Loyalty
Service Fulfillment
Warranty Management
Parts Order& Logistics
Setup & Planning
Service Invoicing & Reporting
Service Request
Management
Contract Management
Level 2Sub-process
Key Performance
Measures
Level 3Activities
Key Performance
Measures
Level 1SEPSM
Handle field admin and
support tasks
Fix problems remotely
Re-order/correct/ place new parts
orders
Tools scheduling and
fulfilment
Service Provision & Field Support
Coordinate and expedite with
service vendors
Complete field service report
after FE debrief
• FE utilization• Support cost per repair• Fulfillment TAT
• Remote
Resolution %• Resolution TAT• First time fixed
right
percentage
• TAT• Answer Rate• Accuracy • First Time
Response
• Order Accuracy• TAT• Back order %age
• TAT• Availability %• Tools calibration
percentage
• TAT • Compliance %
• Debriefing
Accuracy• Missed billing $
SAMPLE
© 2014 Copyright Genpact. All Rights Reserved. 17
Establish linkages between performance measures and process outcomes NOT EXHAUSTIVE
Max
Minimum
Median
Key Business Outcomes
Field engineer utilization
%
30 79
59
Key Performance Drivers
% Asset remotely connected*
21 100
83
First time fix rate % 27 86
66
On-time parts delivery % 81 96
89
First time part fill rate%
Work orders completed late
%
% Back orders
TAT compliance %
7677
31 9
17
Deploy and monitor remotely
Field service support
Key Performance MeasuresSub-processes Activities
Remote resolution %
5 90
47Fix problems
remotely
Available capacity
Use analytical models for field force forecasting and
scheduling
Wrench timeDispatch the best-fit customer
engineer based on skills, proximity, availability,
preference
Ensure service history records, IB details, required parts/tools
info and other documentation is provided to CE
Manage entire dispatch process until closure and action on all field support activities within
specified TAT
Expedite with logistics / 3PL partner for on-time parts
deliveries onsite
Follow-up on open dispatch / back-orders, handle exceptions,
liaise with vendors, etc. for timely repair/deployment
82
IB accuracy %
Source: Aberdeen Service Management Benchmarks
© 2014 Copyright Genpact. All Rights Reserved.
Bring all critical components under one umbrellaAchieve visibility and control through the right combination of people, process and technology, all at a common ‘workplace’
People
• Trained to handle AMS operations
• Consistency in delivery
• Structured interactions with customers
Process
• Metrics-driven process measurement• Well documented and consistent
operations• Ensured business benefits, guaranteed
performance• Predictable and reliable
Technology
• Proven platform for managing distributed AMS operations
• Superior visibility and control
• ‘One Company’ approach
18
© 2014 Copyright Genpact. All Rights Reserved.
The Service factory modelA confluence of process, people, and technology
19
Centralized back end: Interplay of skilled people, smarter processes, and integrated technology
Local execution of service supported by a
Common central support platform
Measurement system to identify and link key performance indicators (KPIs) to business objectives
Focus on realized benefits
© 2014 Copyright Genpact. All Rights Reserved.
What do companies say about measuring KPIs?
20
“The more you start reporting KPIs the more people understand that we need a lot of introspection regarding the right KPIs for the business
The KPI needs to be one that the board is using regularly to manage the business
Publishing the KPI gives it more exposure and makes people think harder about how they can improve performance against that KPI”
An FTSE 100 Company
“Trying to distill common KPIs across diversified units was difficult but ultimately enlightening……”
An FTSE 250 Company
Professor Sir Andrew LikiermanLondon Business School
© 2014 Copyright Genpact. All Rights Reserved.
You can't manage what you don't measure
21
Based on our experience of working with multiple clients from different industry domains, we strongly believe that:
Many important and “relevant” process KPIs are NOT measured by organizationsMany important and “relevant” process KPIs are NOT measured by organizations
The majority of KPIs that do get measured are NOT used for any analysisThe majority of KPIs that do get measured are NOT used for any analysis
Organizations usually focus on “outcome level” benchmarks and DO NOT FOCUS on “process level metrics”
Organizations usually focus on “outcome level” benchmarks and DO NOT FOCUS on “process level metrics”
After sales services provides: Important sources of competitive
advantage Opportunities to build market share and
profitability
Companies are using multiple measures to assess after-sales service performance
Companies are differing in their usage of service performance measure in both number and variety
More research in service metrics and benchmarking is needed given the relatively little published academic research on this subject
© 2014 Copyright Genpact. All Rights Reserved. 22
There is a need for “process level” benchmarking…
…which can be achieved through interaction and understanding at a “process level” driven by leadership
“Services” is run and managed
CSL is the best platform to achieve this… (with a worthy mix of industry leadership and
academicians)
“Services” is measured, driven, and strategized,and therefore “led”
This will transform the way
© 2014 Copyright Genpact. All Rights Reserved.
About Genpact
Genpact Limited (NYSE: G) is a global leader in transforming and running business processes and operations, including those that are complex and industry-specific. Our mission is to help clients become more competitive by making their enterprises more intelligent through becoming more adaptive, innovative, globally effective and connected to their own clients.
Genpact stands for Generating Impact – visible in tighter cost management as well as better management of risk, regulations and growth for hundreds of long-term clients including more than 100 of the Fortune Global 500. Our approach is distinctive – we offer an unbiased, agile combination of smarter processes, crystallized in our Smart Enterprise Processes (SEPSM) proprietary framework, along with analytics and technology, which limits upfront investments and enhances future adaptability.
We have global critical mass – 62,000+ employees in 24 countries with key management and corporate offices in New York City – while remaining flexible and collaborative, and a management team that drives client partnerships personally.
Our history is unique – behind our single-minded passion for process and operational excellence is the Lean and Six Sigma heritage of a former General Electric division that has served GE businesses for more than 15 years.
For more information, visit www.genpact.com. Follow Genpact on Twitter, Facebook, and LinkedIn.