Service: A Nice Little Earner

Feb 19, 2014
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Cost Vs Profit Centres ExposeInvestigations by ERP Leaks reveal that businesses are transforming service areas, once thought of as a drain on profits, into profit sources in their own right. With the global economy remaining shaky, businesses are focused more than ever on reducing costs. However, those that treat their service department as a cost that just has to be borne are missing a golden opportunity. If your business services the products that it sells, the service component could be your key earner, if product demand is slack. Customer pressure tends to lower the profit margins on products – a survey of 43 senior executives by Aberdeen in 2012-13 says best-in-class organizations report that service margins are on average 10.7% higher than those of products. The survey also identified competition in product and service as a key driver of service initiatives. It’s not just about providing service when a product has been purchased; it’s demonstrating to the customer that the service component is actually adding value. It’s a key to customer retention, which in turn can be a key to survival, in times when demand for new products is low or new customers are hard to find. ERP Leaks went looking for businesses that treat service as an earner. Our investigations confirmed one common, crucial point: the right attitude towards customer service must be supported by the right systems. Organizations we spoke to testify that their ERP systems are crucial to making customer service both efficient and profitable. They provide live visibility of service requests, ensure that follow-up calls are made, and enable analysis of costs.

"Service is our bread and butter"

Fire Fighting Pacific installs and services fire alarm systems, and has always treated its service activity as a profit centre. “We consider the service side to be our bread and butter,” says Management Accountant Wendy Roulston. “It’s the maintenance of your customers that is really the ongoing revenue.” Fire Fighting Pacific gives its technicians in the field the ability to access the company’s ERP system via mobile devices. This enables them to respond better on the spot, gathering all the details of the customer's system, entering all the job information from parts to labour charges, then sending the complete billing information back to the office for invoicing. Corporate Services Manager Charlie Loughnan explained the benefits on camera to ERP Leaks.

Edwards & Godding sells and services high-quality kitchen equipment, and relies on its ERP system to provide top-notch customer responsiveness and ensure accurate billing of service time. ERP Leaks caught GM Ed Sturgess on video.

Proactive maintenance is a key facet of the customer service provided by Matilda Equipment, which supplies heavy machinery to the mining industry. Its ERP system captures live information from its widespread customer base, helping it to avoid very costly breakdowns by ensuring that service checks are made, to detect potential problems.

“We’ve always known that we’ve had the best machines,” says CFO Damien Wilson, “now we’ve got a mechanism to support that with an even better service.”

A business has many parts

Good inventory management is also important. Inventory visibility and the ability to track parts throughout the service lifecycle was identified as the top management challenge by half the respondents in a 2013 Aberdeen survey on Service Parts Management.

“Top performing organizations have been able to provide service leadership with accurate parts forecasts that ensure inventories represent actual service demand, delight customers with efficient service issue resolution, and reduce the cost of service and drive increased profitability,” Aberdeen says.

Such is the experience of Evolution Security, which supplies and services state-of-the-art security equipment. It previously had to contend with conflicting parts lists in disparate systems, risking inaccurate job quoting with obsolete parts. An integrated ERP system has changed all that.

“We’ve got one version of the truth when moving from a quote to an order to an installation,” a company spokesman says.

Good contact is crucial

However, all of this effort will come to nought without proper communications. A customer who feels neglected will likely move on, which is why contact centres have become more than just a voice answering a telephone.

“The evolution of the contact centre to a full service customer management centre confirms that organisations view contact centres as profit generators,” says Andrew McNair, Head of Global Benchmarking for IT software and services provider Data Dimension.

The best ERP systems enable customers to access information via a web portal, where they can log in and place or track a service request. A 2011 Data Dimension poll among 546 firms with contact centres in 62 countries showed that 64% were already handling Internet, with 40% managing SMS interactions and a quarter offering web chat – all via the contact centre. Introducing social media interaction was also high on most agendas.

Businesses spoken to by ERP Leaks backed these conclusions. To retain their customers, and keep them happy, they’ve adopted technology that makes a client feel connected, and valued. Without good ERP, you may be stuck with a cost centre when you could be generating profits.