Some important points to consider:
- AMR research in 2003 calculated that major industry service parts inventory value was about $194 billion
- In many service organizations, the cost of parts now exceeds the cost of labor.
- Several firms organize their service parts business as a profit center; many businesses make more profit from service parts than they do from service labor or the sale of finished goods.
- Deliotte Research estimates that service profits are 46% of manufacturing companies’ total profits.
- AMR research estimates that service sales in 2004 provided 29% of corporate revenues and 50% of corporate profits.
- Forrester Group predicts that service parts will overtake products as a base revenue source for manufacturers by 2012.
- Deloitte Research survey results show that 67% of companies are growing service at the same rate of slower than production. The median company gets only 40% of after sales service and 75% of parts sales to its own captive installed base.
Source: “Service parts balance: Practical ways to enhance
your bottom line,” by Joseph D. Patton, Jr., APICS Magazine, February 2007, p.
44-46.