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AI-Driven Supply Chain Network Optimization: Transforming Efficiency and Enhancing Aftersales Service
Table of Contents
- During the pandemic, businesses of all types saw just how fragile the global supply chain was. Supply chain optimization is an ongoing priority; it demands new processes, advanced tools, and open-minded leadership.
- The complex nature of aftersales makes it even harder to build a near-perfect supply chain, but the fast pace of the industry makes it that much more important.
- Technologies like AI & ML can completely overhaul how supply chains operate, but it’s important to know how to implement these technologies.
- When a supply chain is optimized, businesses will experience better revenue outcomes, increased customer satisfaction, and lower costs.
The world witnessed what happened with the global supply chain faltered due to the pandemic; customers weren’t receiving their products, manufacturers were missing raw materials, brand loyalty and customer satisfaction was at an all-time low, and the worldwide economy saw a long list of downstream impacts.
Supply chain network optimization is about more than getting Lucy her new pair of shoes. It’s about getting farmers critical machinery during harvest season. It’s about getting hospitals life-saving devices during care surges. It’s about making sure food doesn’t go bad while it’s on its way to hungry people.
Optimizing Supply Chains with AI
Optimizing supply chains has always been complex, no matter what part of the supply chain you operate within. However, in the aftermarket business, there’s an additional layer of complexity. On the aftersales side of the house, OEMs and dealers are faced with harder-to-predict demand numbers, seasonal fluctuations, service dynamics, and more. With so many variables at play, human labor isn’t a sufficient solution to supply chain hiccups in the aftermarket business.
For businesses, today’s landscape is more complex than ever. The circular economy, the importance of efficiency, and the ultra-competitive reality of aftersales come together to demand a new approach. With the right tools and technologies, like Artificial Intelligence and Machine Learning (AI & ML), aftersales supply chains can better meet customer needs, help reduce equipment downtime, and ultimately increase the customer lifetime value of every single customer.
The impact of AI on supply chains isn’t just anecdotal, there is plenty of data to illustrate how revolutionary this technology can be:
- According to a McKinsey study, adopters of AI in the supply chain space saw a 15% reduction in logistics costs and a 35% improvement in inventory levels.
- AI has the potential to reduce demand forecasting errors by 50%.
- Top-performing supply chain organizations utilize AI 2x more than their lower-performing peers.
The data doesn’t lie, and what the data is telling us is that AI is imperative for supply chain optimization. In the aftersales world, the importance of cutting-edge technology isn’t a question. The question now is, how can the aftermarket business reach its full potential using AI? We’ll show you.
What is Supply Chain Optimization?
In simple terms, supply chain optimization centers around ensuring that parts and products reach customers within the expected timeline, with as little waste as possible, and at the lowest cost available, while still maintaining top-tier quality. It’s not an easy task, but AI is making it that much more accessible.
For some businesses, supply chain optimization ends after the customer receives the goods or services they ordered initially, but for OEMs, dealers, and other aftersales leaders, supply chain optimization must address the product’s entire lifecycle, including replacement parts, updated software, and service needs. It’s always changing, and since customer needs can be so variable, the importance of AI is underscored even further in this space.
Key Components of Optimizing Supply Chains
When attempting to optimize supply chains in aftersales, there are many moving parts to consider. Yes, customer satisfaction is important, but so is demand forecasting, inventory management, transportation & logistics, and much, much more. To get an understanding of what it takes to truly optimize the entire supply chain, you’ll need to factor in the following:
Demand Forecasting
At any point, a farmer could have an urgent need for a replacement part on their tractor, or a city bus could need a new fan belt. Without these things, the farmers’ ability to harvest their crops is hindered and the city’s ability to provide its residents with transport slows down. In order to meet these needs quickly, OEMs should hone in on high-accuracy demand forecasting. Anticipating customer needs before issues arise is one of the best ways to set your aftersales offerings apart from competitors.
Inventory Management
Once you can anticipate who needs what, you have to be able to meet their needs. Inventory management isn’t easy; too many tractor replacement parts on hand take up unnecessary space and result in excess costs, but too few could mean that multiple farmers lose out on their crop yields during harvest season. Finding the sweet spot takes a lot of work – and many times, AI – but it’s crucial when optimizing supply chains.
Distribution and Transportation
Knowing what your customers need and ensuring that you have it available is only half the battle – you also have to be able to get replacement parts to them quickly. Do you have mechanisms in place to ensure a seamless distribution of aftermarket parts? If not, AI might be able to help with planning and coordination.
Service Needs
It’s not always equipment parts and supplemental machinery needs. Sometimes, customers will have to work with your service technicians to fix their machine, update the software it uses, or even identify where an issue is coming from. Providing optimal service in the aftermarket business can help lengthen the lifecycle of original equipment and cut down on the need for replacement parts, putting more money back onto your bottom line.
Cost Optimization
With high inflation, product shortages, and transport delays, keeping supply chain costs low can feel almost impossible. If OEMs, dealers, and related providers take on too many supply–chain–related costs, it can hinder their ability to operate entirely. An optimized supply chain is one that balances efficiency with cost reduction.
Customer Relationship Management
If customers aren’t getting their needs met, whether that’s not receiving spare parts in a timely manner or not getting a technician out to fix their equipment, they’ll find another aftersales expert who doesn’t leave them in a bind. By anticipating customer needs, developing clear lines of communication, and providing excellent service, OEMs and dealers get closer and closer to fully optimized supply chains.
Benefits of Supply Chain Optimization
When a supply chain is optimized, providers and customers both win. Some of the top benefits of optimized supply chains in aftersales are:
Higher Revenue
There are a number of causes that push revenue numbers higher when supply chains are fully optimized. High customer retention rates help provide a revenue cushion while brand recognition and organizational expansion propel revenue growth over time.
Lower Costs
When any part of the supply chain goes wrong, costs increase. If parts are backordered and dealers need to place rush orders, there’s usually a higher cost associated with that. When alternate transportation methods are needed, you guessed it, costs increase. To avoid unexpected and often inflated costs associated with delivering aftermarket goods, businesses need to be able to trust that their supply chain is operating as designed.
Improved Customer Satisfaction
A large driver of healthy revenue numbers, customer satisfaction is one of the most important metrics in the aftermarket business. When end users know that they can rely on dealers to get them the parts they need right when they need them, they’ll be happier, making them more likely to stick around or recommend specific aftersales providers to other organizations in the industry.
Aftersales Supply Chain: Yesterday vs. Tomorrow
20 years ago, supply chains were important, but they weren’t expected to be flawless. Customers were accustomed to goods taking a while to get to them, and they certainly didn’t expect their needs to be met within a 1–2-day window. If something interrupted the connectedness of the supply chain, there was a lot less backlash for businesses involved – it’s just the way the world worked.
As the supply chain became globally connected and highly efficient around the world, the baseline expectations began to shift. People and businesses alike expect a near-instant turnaround from their suppliers. Overnight shipping for business-to-consumer goods has become the norm, and now, business-to-business transactions face the same expectations.
It’s not just fast delivery times and customer-centric service that have altered supply chains forever; new tools and technologies have made it possible for businesses to make data-driven decisions, mitigate delivery risks, and anticipate customer needs. With things like AI & ML accessible to all organizations, supply chain optimization looks entirely different than it did even 5 or 10 years ago.
The Role of AI in Aftersales
When it comes to distribution, aftermarket businesses have one of the most complex dynamics to manage. For instance, it is incredibly hard to predict when a commercial freezer is going to stop working and need a specific replacement part. Even further, aftersales professionals need to be able to figure out exactly what part is needed, have it in their inventory, and coordinate with a technician to install the part – all before the food at the restaurant goes bad.
These ever-changing variables require more computing power, more data tracking, and seamless logistics coordination, putting immense pressure on dealers, OEMs, and similar providers. Instead of trying to manually track a never-ending list of metrics and sending technicians to every customer to test equipment performance by hand, these organizations should lean on artificial intelligence to do the heavy lifting.
AI, when implemented correctly, can perform complex tasks in seconds. These same tasks would take human employees hours, days, or even weeks to complete. For instance, AI can:
- More accurately predict demand of certain spare parts based on historical trends and part life cycle data.
- Anticipate customer purchasing behavior to promote cross-selling or up-selling of new parts or software when users are most likely to need the upgrades.
- Call on the web of the Internet of Things to track equipment performance, flag faulty parts, and alert manufacturers of the need for a replacement.
- Seamlessly coordinate technician schedules with customer availability, ensuring no time is lost to scheduling mishaps.
- Automate back-end processing, provide fill rate insights, and illustrate how to adjust distribution techniques to better meet customer needs.
The possibilities for the use of AI in aftersales are truly endless. As AI continues to evolve and mature, there will be more applications that open up in the industry. However, AI isn’t the only tool that aftermarket businesses can use to optimize their supply chains.
Implementation: How to Optimize Supply Chain in Practice
Thinking there is only one approach to supply chain optimization is very short-sighted; innovation comes from new ideas, fresh tactics, and sometimes, taking a risk or two. If you’re looking to improve supply chain functionality in the aftersales space, here are the top 3 tips:
- Don’t back away from hyperconnected supply chains. These can feel overwhelming at first, but a tight network of resources and professionals can help close any gaps that may exist within the supply chain.
- Start small. You’re not going to get everything right all the time. Take one step at a time. Where are the biggest pain points in your supply chain? How can you address them one-by-one?
- Use the tools that fit your needs. There are thousands of technologies and next-generation solutions to optimize supply chains, but the ones that will actually optimize how your goods get to end users are the ones that will address your company-specific needs.
The ups and downs of supply chains aren’t going anywhere. Avoiding issues is a great primary goal, but the best supply chains are able to adapt to problems as they arise, take a new approach, and achieve the desired customer results.
How close is your organization to achieving an optimized supply chain? What are three things you can do today to start working towards that goal? Don’t waste another minute.
FAQs
What is supply chain optimization?
In simple terms, supply chain optimization centers around ensuring that parts and products reach customers within the expected timeline, with as little waste as possible, and at the lowest cost available, while still maintaining top-tier quality.
What is the importance of optimizing supply chains?
When a supply chain is optimized, providers and customers both win. Some of the top benefits of optimized supply chains in aftersales are: higher revenue, lower costs, improved customer satisfaction.
How to optimize supply chain efficiency?
Here’s 5 ways to optimize the supply chain:
1. Always start by optimizing company-owned inventory.
2. Improve your distribution network.
3. A supply chain council can help in removing barriers within the organization.
4. Use technology to improve the supply chain.
5. Maintain healthy relationships with your suppliers.
Why is supply chain network optimization important?
The goal of supply chain network optimization is to identify the ideal configuration of manufacturing facilities and distribution hubs. In addition to finding the most cost-effective network configuration, the solution should balance supply and demand.
Download The Free OEM How-To Guide “Boosting aftermarket performance in a decentralized dealer network”
In the whitepaper you’ll learn:
- Why winning in the aftermarket is a crucial pillar, not just a nice-to-have
- The untapped potential of parts planning among numerous OEMs
- The tangible benefits of enhancing aftersales through a unified downstream supply chain
- A case study: How AGCO supercharged their customer fill rates by a whopping 43% by transitioning from a blind spot in supply chain visibility to an interconnected dealer ecosystem
William Barkawi
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