Speedy After Sales Service Can Mean Increased Profits
How post-sales can benefit high-tech manufacturers

by Phillip Corwin, UPS Supply Chain Solutions

Reverse Logistics Magazine, May/June 2007

Consumers have traditionally had high expectations of the way their high-tech products perform, but those expectations have grown to include exceptional customer service as part of the post-sales experience. Today, consumers expect their high-tech products to work reliably right out of the box. And when something goes wrong with the equipment, they want the defective product repaired or replaced and returned to them quickly.

When original equipment manufacturers (OEMs) demonstrate excellent post-sales repairs, they can reasonably count on enhanced levels of customer loyalty, which translates into future purchases. These lessons learned are changing the way high-tech OEMs operate their business.

Post-sales Service Leads to Profit and Differentiation

Post-sales, once viewed as a necessary evil by many companies, now operates as a profit center for many OEMs. In fact, a Deloitte Consulting LLP survey of more than 80 manufacturers, revealed the customer service fees (for which premium prices can be charged) accounted for more than 25 percent of total sales revenue, and in some cases, as much as 50 percent. A survey referenced by Transport Intelligence Ltd., a London, England-based research firm, found that the average profitability a company received from post-sales services was 75 percent higher than it earned from the original product sale.

OEMs are also realizing that providing best-in-class repairs is a competitive differentiator. As many high-tech products become more commoditized, how an OEM responds to a service failure can become a competitive advantage. In an Aberdeen Group survey about service, 59 percent of respondents claimed to invest in their post-sales services as a way to gain an advantage in new product sales.

The 3PL Advantage

Most high-tech manufacturers know that achieving speed and consistency in post-sales service can be a real challenge. By hiring the right 3PL, high-tech equipment manufacturers can meet or exceed their customers’ service level expectations and leverage repairs as a brand differentiator.

When searching for a 3PL, companies should ensure the 3PL has the following capabilities:

• A global field stocking network
• Strategically located distribution centers
• Parts and inventory planning capabilities
• Advanced IT and visibility systems that allow companies to locate inventory at all times
• Expertise to guide the manufacturer through import/export, customs brokerage and freight forwarding processes

Conclusion

By outsourcing their post-sales service needs to a 3PL, high-tech companies can focus on their core competency--manufacturing innovative products. A 3PL can also provide added value in an increasingly competitive marketplace where even the most cutting-edge technology can transform into utility or commodity status. By executing a strong repairs strategy, companies can have healthier profits, a competitive advantage and increased customer loyalty.

Phillip Corwin, marketing director, is responsible for the UPS Supply Chain Solutions' post sales portfolio which includes service parts logistics, reverse logistics and repair services. He sets strategic direction, measures customer satisfaction, develops new services and initiates quality improvement for the post sales product portfolio.

Reverse Logistics Magazine, May/June 2007