The Changing Model for Logistics Solutions
How DecisionOne Has Created a New Model
for Logistics Support
(Originally published in the April 2000 issue of AFSMI's The Professional Journal.)
By Timothy W. Purkis, Vice President Logistics Services Sales
With over thirty years experience as a leading provider of maintenance, repair and logistics services, there are two truths we have seen our customers face with increasing regularity:
It's Easy to Lose Your Focus
- It's easy to get distracted from your mission and lose your focus.
- Constant change will test your Business Model - including logistics.
To compete successfully in today's highly demanding markets, we believe it is critical for businesses to concentrate on their core competencies. It's not a new concept; in fact most of us have heard this for more than a decade. Whether they are an OEM that sells PCs, Network Servers or Office Automation equipment, one thing is for certain - OEM organizations earn their reputations and generate their revenues by providing their customers with cutting-edge products, at a fair price, and not by concentrating on their non-core competencies, such as manufacturing, distribution, maintenance, inventory control, parts supply and logistics management. The latter typically represent areas where outside companies, each with their own respective core competencies, earn their reputations and generate their revenues. This is essentially where DecisionOne Logistics Services has positioned itself in the services marketplace.
However, since all of these areas are important to the overall well being of the customer, they must all be provided as part of a total solution. As such, many services organizations - even the larger ones - may find that they must also utilize the services of an outside company if they want to position themselves as a "total services provider" to their respective customer bases.
Many of our largest customers, leading OEMs in the industry, have a similar story to tell. When they started their companies, the Executive Team spent most of their energy on developing the best product in the industry. Their focus was on the product, its features, how it would benefit the customer and how it would stack up against the competition. As they grew into a successful company, they found their time was increasingly spent discussing production problems, distribution problems, support issues, parts shortages, etc. They found that over time they had little time left to actually develop products, the lifeblood of the organization!
Clearly they had lost their focus and were increasingly distracted trying to be good at functions that were not a competency required to deliver a world class product. Most of these companies began a serious effort to outsource those non-core activities to organizations that could provide world class support. Typically, manufacturing, technical support, maintenance and logistics were outsourced to companies that provided these services as their core competency.
For this reason, the details of providing a total logistics capability may be best left to those organizations that have the core competencies to allow their customers to avoid getting "caught up in the details."
Constant Change Will Test Your Business Model - Including Logistics
With product life cycles now measured in months instead of years, logistics management has also become more difficult. Prices continue to drop with no end in site. Products get more reliable and warranties get longer. What this all means is change is constant and your Business Model must be constantly revisited, and retooled to adapt to this change. From a Logistics viewpoint, the answer to the replenishment question can change over a product life. Coupled with a growing base of sophisticated customers and stiffening competition, customers need a life cycle management provider that can help them get the job done, while not distracting them from their business-critical mission.
Sometimes the Business Model requires significant retooling. A case in point is the Service Delivery Model used on Laptop and Desktop computers. The old model for service delivery used to be dispatching a Field Engineer with a part to perform a repair on the laptop or desktop. Today, the model employed has changed in both cases. In the case of Laptops, a Return to Depot Model makes much more sense since a complete complement of parts, diagnostics and test equipment allows for a fast repair. Using overnight transportation, the repaired Laptop can be returned in working order to the customer much quicker.
In the desktop case, more than one model is used. For some devices, like monitors, mice and keyboards, the Service Delivery Model is to use a Logistics solution right to the desktop. A courier will deliver and install the replacement part and take away the defective. For the rest of the Desktop computer (the CPU), a conventional Service Delivery Model is used where a Field Engineer will visit the site to perform the repair. The Logistic solution, defined in terms of the Service Delivery Model, is becoming more and more prevalent with portable and handheld devices.
The Logistics Market Is Transforming
Parts repair has grown by more than 50% in the past four years, and logistics management has more than doubled in the same period. Presently, more than 50% of Fortune 1000 companies are outsourcing some part of their logistics support to outside providers with the requisite core competencies.
According to William K. Pollock, president of Strategies For GrowthSM, a services industry consulting firm, and consultant to DecisionOne, "there is much evidence that the logistics market continues to change (Figure 1). First, as repair costs begin to approach replacement costs for many parts and components, there has been a general lessening of demand for repair in many areas, replaced by a growing need for whole unit replacement. The effect of this change on the market is a reduced demand for repair, but a heightened need for screen and test requirements - and not all services providers have the infrastructure and resources to step up to the task."
Many companies have learned that the most critical factor in Logistics support of high tech equipment is not the repair/replacement cost but the speed of turning the equipment around. The faster you can return the defective inventory into good stock, the lower your support costs.
Further, a movement toward smaller, and cheaper, computing devices has also led to increased supply chain management requirements and, accordingly, demand for an expanded portfolio of cost-effective supply chain management services.
The proliferation of more reliable components and devices has also led to the use of larger warranties, resulting in greater cost pressures for OEMs. The effect on the market has been an increasing demand for advanced depot services for OEMs and commercial customers, and the ability to develop more cost-effective solutions.
Finally, shorter product life cycles have, in turn, led to greater inventory obsolescence risks. This too, has created a demand for more efficient, cost-effective supply chain management services including End-of-Life Support and Planning.
In today's market, not only are each of these processes becoming even more complex and time-consuming, they are also becoming highly specialized, and no longer "just part of doing business" for most services organizations. "The logistics services market has transformed itself into one that truly mirrors the changing needs and requirements of the market," says Pollock. "No longer are customers happy with little more than a 'laundry list' of disjointed features and services that, even when aggregated together, still fall short of providing a total logistics solution."
The Logistics Value Proposition is Shifting
The historical logistics market was one where customers primarily required only engineering and technical repair capabilities, repair site proximity and a limited breadth of supported technologies from their providers. However, in the current market, these requirements have since grown to include cost-effective, high volume supply chain management; "customized", or tailored, solutions; and the ability of the provider to integrate with the OEM's value chain, including supplier management. Clearly, the requirements have increased, along with the overall needs of the market (Figure 2).
Historically, all it took for a logistics solutions provider to support the majority of its customers' needs was a combination of multivendor repair capabilities, a national repair center, and a commitment to quality. However, the growing demands of the market today now require the following to be included in the provider's selling proposition as well:
We believe that these specific value propositions are what make DecisionOne's logistics solutions unique in the industry today. In fact, through our LogisticsOne portfolio, we have remained vendor-neutral in all of our customer relationships, and have the ability to repair more than 22,000 different technology parts. We currently perform repair services on more than 100,000 parts every month in our nine depot facilities located across North America. Our ability to support the market's growing needs is met by our more than 1,100 technicians, a supply infrastructure of nearly 3.5 million parts, and approximately 300,000 parts numbers. What makes it all work is our ability to integrate all of these components into a customized, "single-source logistics solution for our customers.
- Size, scope and scalability of supply chain management capabilities;
- Manufacturer independence;
- Logistics experience and a strong reputation;
- Certifiable quality (e.g., ISO 9002 registration), and a commitment to continuous quality improvement; and
- Organization stability.
Delivering a Single-Source Solution to Meet the Market's Needs
It is also essentially in these areas where DecisionOne has been a leader in pioneering the development of a single-source solution for logistics management. For example, our LogisticsOne offering is an industry-leading, cost-effective parts repair and logistics solution that helps services organizations, both internal and external, to improve all areas of customer service.
The five principal elements of a single-source logistics solution are (Figure 3):
- Supply Chain Management
- Parts Repair and Refurbishment
- Returns Management
- Systems Integration Management
- Parts and Supplies Sales
Supply Chain Management is the focal point of any logistics management solution, and through our LogisticsOne offerings, DecisionOne has the ability to manage the support requirements of a product through its entire life cycle. These capabilities include:
Parts Repair and Refurbishment helps OEMs, VARs and third party maintainers augment or replace their existing repair capabilities in an effort to decrease turnaround time and, ultimately, increase customer satisfaction. These capabilities include:
- Warranty and end-of-life fulfillment services, to assist companies in supporting products that are under warranty or are no longer manufactured;
- Warehousing and distribution services, that provide a multitude of options for managing the customer's inventory through a tailored solution; and
- Inventory sales, that assist in turning excess inventory into cash for customers through a telesales-based sales activity.
Systems Integration Management provides customers with assistance at all levels of technology transition including servers, workstations, network equipment and peripherals. These services include:
- Parts repair, and the ability to support a wide variety of parts and components ranging from CPUs, workstations, PCs and laptops; to CD-ROM, disk, floppy and tape drives; to a full range of peripherals and parts kits;
- Regional presence, employing the use of both local/regional depots, as well as end-of-runway repair in support of critical equipment such as laptops, notebooks and whole unit devices;
- Reutilization services, whereby defective products can be repaired, tested and reused; no longer needed products can be refurbished and redeployed; and reclaimed units can be converted into a source of spare parts;
- Vendor management, to help OEMs both increase their level of service, and reduce their administration costs through the use of a single point of contact for all of their spare parts repair and replenishment issues; and
- Planning and consulting services that may be used to identify repair and logistics issues, establish benchmarks for current systems, determine and implement new procedures to increase efficiencies, and analyze program results for continuous quality improvement.
Returns Management provides fast turnaround for high volume returns through a variety of programs, beginning with:
- Configuration, providing complete services for new technology roll-outs, taking customers from base hardware, add-ons and installations through the configuration process, to shipment to a customer-designated location;
- Redeployment, including the determination of whether to recycle older technologies into newer platforms, or procuring entirely new systems; and
- Test/burn-in, including the determination of the operating condition for equipment in a customer's inventory when it is otherwise unknown, or making recommendations about further use of the equipment and conducting a burn-in test, as necessary.
Parts and Supplies Sales assists customers with both routine procurement issues and hard-to-find parts. These services include:
- Test and screen, including testing and quick adjustments, screening out all defective products and returning good products/parts to available stock;
- Repair and refurbishment, for improving the yield from test and screen programs and further maximizing inventory investments; and
- Upgrades and engineering change orders (ECOs), where software may be upgraded, required engineering changes can be added, or products/parts can be modified per the customer's instructions.
A single-source logistics solution must also go beyond merely the typical "laundry list" of individual services offered by most providers. It must also address unique systems and processes, including:
- Computer parts, in terms of stocking the right parts, finding older technology spares and stocking upgrade kits;
- Supplies, serving as a single source for all of the customer's computer supply requirements;
- Inventory disposal, helping to dispose of excess inventory by tailoring a program to either sell the customer's inventory, or purchase it in support of an "end-of-life" program; and
- Product sales, by stocking the customer's units in both new and refurbished configurations, or by extending the life of products to protect the customer's investment in software and programming development.
Benefits of Using a Single-Source Logistics Solutions Provider
- Extensive training to establish and maintain the required level of technical expertise of the technician workforce through a rigorous series of continuous training programs;
- State-of-the-art shop floor control systems designed to track individual parts through the entire repair cycle, and recording all relative data for historical analysis and reporting;
- Critical program support, involving all facilities and staff, and accessible 24 hours a day, seven days a week; and
- Continual investment in technology to ensure the ability to deliver the required levels of repair capabilities on a cost-effective basis.
The benefits of using a single-source provider of logistics solutions should be very clear - certainly as measured against the potential downside of attempting to do it all yourself, and risk going beyond the capabilities of your organization's core competencies. Pollock further suggests that "it is primarily a single-source solutions provider, such as DecisionOne, that is best suited to meet its customers' total logistics management requirements by providing them with a full complement of services, in an integrated package", comprising the following:
It is DecisionOne Logistics Services' mission to provide its customers with total logistics solutions through a single-source provider. This is our core competency - this is what we do. By allowing our customers to concentrate on their core competencies, not getting caught up in the details, and keeping focused on their business-critical missions, we help ensure that they will always receive the total levels of service and support that they require.
- Breadth of logistics capabilities, including replenishment, vendor repair management, and parts repair and refurbishment;
- Rapid response, through a nationwide network of regional and end-of-runway facilities designed for quick turnaround of critical parts;
- Capacity, or both the ability and economies of scale to support thousands of parts, and process tens of thousands of repairs each month;
- Customer focus, reflected in the way in which the provider both deals with its customers, and provides services and support on a customer-tailored basis;
- Technology, through the use of state-of-the-art equipment to support a full range of repair programs and activities; and
- Experience, in providing tailored logistics and repair solutions to a large and diverse customer base, covering all of their logistics solutions requirements.
Timothy W. Purkis is Vice President Logistics Services Sales at DecisionOne. He may be reached via e-mail at email@example.com.