Designing an Asian service parts network

Challenge

A U.S. based consumer electronics company with rapid Asian growth was falling behind competition with regards to aftermarket services. Driving the performance shortfalls were replacement part shortages and misplaced inventories and long-lead times. Additionally, excessive inventories of defective in-warrantee parts on the company’s books and loss of service revenue had a significant negative financial impact.

Approach

• Starting point — Situation assessment: An initial assessment of the problems led to a three-step approach: Parts depot network optimization, inventory deployment, and operating systems upgrades.
• Parts depot network optimization: Consideration of regional and in-country hubs, city center depots and two-hour response satellite parts locker locations.
• Inventory deployment: Used simulation modeling tools to optimize the deployment of the parts inventory across the network considering part criticality, A-B-C classification, customer SLA requirements and the trade regulations and tariffs across the Asia region.
• Systems assessment: Designed a new operating model and specified the SAP-based solution with integrated custom applications.

Results

• Reduction in on-hand defective part inventories from over six months to less than two weeks, freeing up tens of millions of dollars in working capital.
• Improved fill rates and lower operating costs enabling further market growth and repairing its poor aftermarket support image in the marketplace, most notably in Japan, its largest Asian market.