differentiated service levels in spare parts supply

© Wärtsilä DBAD948347 - PUBLIC

DIFFERENTIATED SERVICE LEVELS IN SPARE PARTS SUPPLY ISLA Service and Logistics Summit 2016 Benedikt König

27.4.2016 [Presentation name / Author] 1

© Wärtsilä PUBLIC DBAD948347 -

Differentiation is a complex undertaking when being applied consistently in a modern supply chain

• The supply chain from Wärtsilä spare parts offers complexity • Various customer groups have different requirements • Today we translate customer classification and order situation into a priority level • The priority level leads to various differentiations along the supply chain • Some differentiation cannot be done in the existing business model – but requires a new

business model • The implementation of the differentiation took time • During the implementation we learned a lot • Q&A

4/27/2016 [Presentation name / Author] 2

CONTENT


The supply chain from Wärtsilä spare parts offers complexity


INTRO

We serve 12,000 customers

115,000 deliveries, constituting more than 900,000 line items, packed in 134,000 packages

In one year: 16,300,000 kg of parts, with a total volume of 46,700 m3

117,000 unique materials stored

66,700 export declarations

Around 106,000 transportations making use of roughly 150 carrier modalities

We maintain knowledge and skills for 350 different product types

Our 3,600 field service professionals perform 100,000 field services jobs

We provide 20,000 technical answers

We maintain 450 installations under long-term contract

...One promise to the customer: We offer expertise, proximity, reliability and responsiveness for our customers in the most sustainable way

Wärtsilä Corp. 2015 sales of EUR 5,029 million with an EBIT rate of 12,2%

Wärtsilä Services 2015 sales were EUR 2,184 million

© Wärtsilä PUBLIC DBAD948347 - 4/27/2016 [Presentation name / Author] 4

Various customer groups have different requirements

CUSTOMER

Preventive solutions Responsive solutions

Optimizing solutions

Willingness to in-vest in certainty

of operations

High

Low

Willingness to use external

expert support

High Low

Customer need = What we offer

Cus

tom

er v

alue

cat

egor

y =

H

ow w

e se

ll an

d se

rve AAA

AA

A

Partners Balancers DIYs OEMers Savers

KAM customers

Customers most likely to be satisfied with Wärtsilä core

service level

Customers most likely to choose “full service”, i.e.

advanced modules

Customers most likely to choose at

least one advanced module


CUSTOMER

Today we translate customer classification and order situation into a priority level

KAM P2AAA P3AA P4A P5Other P3

Quotations

Priority setting based on Customer Category and Delivery Service Level

Based on analysis of Sales and history, this will result in following priority level split

regarding part sales and deliveries

Other = Customers without category value and Wärtsilä companies

Emergency(S1)

Accuracy(S6)

Open(S2-S4)

Unclear(S5)

KAM P1 P1 P2 P3AAA P1 P2 P3 P4AA P1 P2 P4 P5A P1 P2 P5 P5Other P1 P2 P3 P4

KAM P1AAA P1AA P1A P1Other P1

Advanced Service Support

Spare parts orders


The priority level leads to various differentiations along the supply chain (I)


DIFFERENTIATION

Quote Order RFQ Support Customer Contact

Identify Customer Dedicated resources Differentiated detail of asset available

Priority by customer category Qualification of contact persons

Priority in Tech ID, alternative execution Depth of investigation

Priority by customer group / priority level Verification of lead times / expediting

Priority by customer group / Priority Level Verification of lead times / expediting / order correctness Reconfirmation response times


The priority level leads to various differentiations along the supply chain (II)


DIFFERENTIATION

Distribution & Invoicing After Service Supply Picking & Packing

Depth of lead time verification Priority of parts in stock Priority / extent of supplier expediting Inbound delivery Priority in quality inspection / tuning / reclassification

Priority in Priority level and delivery date Usage of fast lane

Priority by priority level and delivery date Utilization of express delivery, Special support Customs support

Priority by customer group / Priority Level Support for non conformities (Wärtsilä caused or not) Response times for immediate corrective action Feedback level of preventive actions


Some differentiation cannot be done in the existing business model – but requires a new business model to fulfill those customer needs


DIFFERENTIATION

• Old engine base require to maintain • Spare parts stockings • Technical competence • Sourcing competence • Manufacturing competence

• Old engine base do not offer

• Volume • Similar margin (on average)

• Old engine base have the risk

• Scrapping of old stock • Self alimentation of resources • Upsetting customer base

QuantiParts offers you OEM parts for classic Wärtsilä engines The best technical know-how, 24-7 parts services and cost-efficient solutions. QuantiParts is here for you and your engine


The implementation of the differentiation took time


PATH

2012

1. Profitability anaylsis 2. Blueprint 3. Resourcing 4. Customer value category.

1. Portal planning 2. Parts development 3. Tech request development 4. Customer verification.

2013 1. Understanding of impacts 2. Finetuning of parameters 3. Cause / Impact adjustment 4. Continued people training 5. Regional center roll out

2015

1. Account management model 2. Portal pilot 3. Parts pilot frontline 4. Advanced Services model pilot 5. Regional centers

2014

2016

1. Roll out model 2. Renegotiation of accounts 3. Parts implementation along supply chain 4. Knowledge base priorisation 5. ASM roll out 6. Regional center roll out


During the implementation we learned a lot • We spent quite some time on the market analysis, customer segmentation, getting

commitment from the organization

• Once marketing has decided what to do – they expect to implement. However it is a long way from powerpoint bullet to a detail requirement definition of the sytems, to the SAP implementation, to the people training / understanding

• Do not underestimate the impact of master data

• There is a clear difference on topics that customers claim to be mandatory and customers are willing to pay for (sales people are willing to charge their customers)

• Sometimes the effect of a differentiation is different to what one would expect to see. If you differentiate e.g. by customer you should not forget that also their ordering behavior is different – which may turn out disappointing results. Fine tuning is still a journey


LEARNINGS


LEARNINGS

Q & A

differentiated service levels in spare parts supply

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