The Field Service Automation landscape looks very different than it did 25
years ago when I began my career. Back
then, the market was in its early growth stage. Today, the market is mature.
Field Service functionality can be found in different types of applications
which we categorize into ERP/CRM (e.g., SAP, Oracle, Microsoft Dynamics, etc.),
Integrated Service Management (i.e., Astea, Metrix, Vertical Solutions, Amdocs,
etc.), Field Mobility (e.g., Antennae Software, Agentek, etc.), Service Parts
Optimization (e.g., MCA, Servigistics/Click Commerce, Baxter, etc.), and Field
Service Optimization (i.e., Service Power, Click Software, TOA, etc.). Applications are available for purchase either
through an On Premise (i.e., License) or On Demand (e.g., SaaS) solution. As
such the decision making process is much more complex.
In the past, the business user had a very vocal voice in the selection of Commercial Off the Shelf Systems (COTS). Sure
the perspectives of technical and economic decision makers were considered but
now these participations have a greater role in placing constraints and/or
mandates on the types of systems that are purchased. The technical platform on which the field
service application is written is often more important as the feature
functionality of the application itself. The ability of this application to integrate
with other corporate systems is also extremely important consideration and
constraint. One thing which is continued
to remain certain is the applications will continue to evolve and new vendors
will continue to enter the market while others disappear.
Given all these complexities, we believe end-users can benefit from working
with an independent and objective third party advisor such as ourselves to help
define the solution, recommend a qualified vendor short list, and evaluate proposals. We believe our understanding of where this
market place has been and where is it heading, combined with our knowledge of
the current state of the art and vendor market is critical in helping clients
to select and implement solutions which meet the needs of today and the
requirements of the future.
After checking around the web and other industry sources, I was surprised to see that no one had ever written about the evolution or history of Field Service Automation. I think this is an important topic because like so many things in life, you can't understand the present until you grasp the past. So, at the bequest of a few clients and my own passion for this subject, I've decided to do a series of blog post exploring the history of Field Service Automation.
My first assignment as a neophyte management consultant back the mid 1980'sinvolved a benchmark evaluation of the state of the art of Field ServiceManagement Systems (FSMS). Back then, commercial off the shelf technology(COTS) was just coming on line to automate the process of managing a fieldservice organization. The technology automated basic processes from handling ofa customer service request, to dispatching a Field Service Engineer, tomanaging their spare parts inventory, to depot repair of defective reports, toreporting and analytics. Up until this time, only the very large, manufacturers(e.g., IBM, H-P, Xerox, etc.) with large field service organizations couldafford to develop automated solutions that were often mainframe based and veryexpensive to design, implement, operate, and maintain. Others were using manualbased processes such a pen and paper or magnetic scheduling boards to managethe service delivery process.
While our consulting firm played a key role in designing and implementingsome of these early enterprise systems, we could see that the emergence of thePersonal Computer would reduce the overall lifecycle cost associated with FieldService Automation. We also observed the emergence of a number of softwaredevelopers who offered COTS systems which could be implemented much faster thancustom designed solutions for the fraction of the cost. Thus, I was handed theassignment to benchmark the state of the art as we anticipated that more andmore of our consulting assignments would be around the recommendations ofCOTS. I remember counting over 24 vendors focused on Field ServiceAutomation. Mind you this was waybefore the days of Enterprise Systems like Oracle and SAP. Over the years, many of these initial24 vendors where either acquired by others or disbanded. However, a number of these initialvendors, such as Astea and Metrix, have been able to stand the test of timebecause they have been able to adapt to market needs and requirements anddevelop enhancements to their applications via acquisition and/or organicdevelopment.
Be sure to check back here at Reverse Logistics Today for the next post in this series. We will be looking at the next wave of development and how our firm continued to emerge as experts in this field (no pun intended).
As many of you know, I have written a great deal about the size and forecast of the Aftermarket & Reverse Logistics Service Market. The reason why I am so passionate about this subject is because I strongly believe that the days of relying on intuition to determine the size of a market are long gone. I have found that companies who take a strategic, statistical, and econometric approach to determining the size and forecast of a market are more likely to experience sustainable, continuous, and profitable revenue growth. This is because a quantitative approach to market analysis enables a company to be more precise and accurate about market demand and revenue potential. As a result, the management team can do a better job at allocating resources and prioritizing investments resulting in the company being better prepared to handle challenges and respond to opportunities.
It does not suffice a company's management team to say "let's not worry about the precise size of the market, we know the market is really big, so let's just focus on getting new business". This is tantamount to taking a trip from NY to LA in your car by just driving west and without a map. You wouldn't expect to such behavior from any educated or even sane person, so why would a company behave in such an irrational manner? I believe that it is because market analysis is more complex than meets the eye. Determining the size of the Aftermarket & Reverse Logistics Service market is part science and part art. It requires that a company really understand the true dimensions and dynamics of the market. And there's the rub. Unlike a product market, which is much easier to define the Reverse Logistics market is large, complex, and fragmented. This makes the task of sizing & forecasting a market very difficult. However, it is not, I repeat not impossible.
Unlike product markets which require knowledge of limited set of factors like competition, product features, price points, number of potential users, and market demand; the Aftermarket & Reverse Logistics Market must be analyzed against a broad array of factors and dimensions that are inter-related and dependent on each other. Examples of these factors/dimensions include:
- Size and age of equipment installed base
- Annual Sales and Return Rates
- Disposion of Product returns
- Expenditures for in-warranty versus out- of- warranty service
- Percent of market served by 3rd Party versus internal repair organizations
- Percent of 3rd Party market served by authorized providers versus multi vendor (i.e., non-authorized) providers
- Service Expenditures by type of service performed (e.g., repair, technical support, advanced exchange, e-Waste, service parts logistics, etc.)
- Service Expenditures by type of equipment supported
- Gross Domestic Product
- Annual Growth Rate of GDP and market participants
By considering these factors, a company can accurately arrive at the size and forecast of the available, relevant, and addressable market. This requires an extensive knowledge of the market and access to multiple databases that track this information as well as a working knowledge of the relationship of each of the factors listed above with respect to how they impact/influence market demand and revenue potential.
This level of complexity should not be overlooked. Some companies only focus on single attribute when sizing the market like percentage of GDP or Warranty spend by OEMs. However, this sort of thinking is much too myopic and results in a under estimate of the true size of the market. The rule of thumb is the more distinctions that one can make about the market and the more facts that one has to support these distinctions, the more likely they will to arrive at a much more accurate and valid view of the market.
In the next series of postings, we’d like to delve into Reverse Logistic ManagementSoftware (RLMS). This first post in an overall introduction to RLMS, while thenext will focus on specific functionality. Feel free to leave any questions inthe comment section.
The currentstate of the Reverse Logistic Management Software (RLMS) should be categorizedas an industry that is set for rapid growth while solidifying its viability byvalidating its approach to Reverse Logistic (RL) operations through automation.
Our currentanalysis of the RLMS State of the Art finds software applications to beflexible and durable solutions that can operate as standalone system or as partof an enterprise package. Evidence that companies are looking for RLMS to be integratedinto other systems was evident when the highest percentage of our respondentschose that to be the most important factor in selecting a RLMS vendor.Additionally, a very large number of respondents in an extensive survey weundertook reported that they used Enterprise Resource Planning (ERP) to managetheir company’s RL. Overall, RLMS’s inerrant flexibility permits customizationto meet precise requirements and gives a distinctive amount of control to theclient to meet their specific needs.
We perceive RLMSfunctionality as analogous to a family where the different applications arelike the individual family members that compose this nucleus. Just like familymembers, these applications share the same “genes,” or in our context, featurefunctionality that makes them very similar. At the same time, it is thevariance or combination of these functions that make each application uniqueand effective. This commonality shapes an almost predefined internal structureof RLMS that facilitates the interlinking or synchronization of variousapplications. This framework allows the optimization of the service chain.
We found thatalmost universally, all reverse logistics functions benefit from “real-time”visibility of selective logistical information. This is a pervasive featurethat enables and maximizes other functions. Benefits such as inventorymanagement, forecasting, recall auditing, return management, and others arecontingent on having an accurate and current picture of where a given asset ison the supply chain.
We see a definite trend of RLMSfunctions becoming more expansive and more encompassing. However, our researchshowed that there remain many functions, such as Liquidation Management, thatneed to be created and incorporated into current offerings or offered as astandalone application.
The RLMS market is a largely undefined and untapped entity. Many industries see reverse logistics as un-glamorous and non-high tech. They therefore discount their inherent need for RLMS. In short, companies need to first understand what RLMS before they can know they need it. Therefore, potential customers have a need to understand the complexities and benefits of RLMS. Many industries are unaware of the different modalities and functions of RLMS and how dramatically RLMS can improve their business. Customer awareness can be raised through concise and simple definitions and models of RLMS. Factors that should shape this description of RLMS are:
1) Cost reduction- Explain both the money lost from poor reverse logistic practices and the revenue possible through proper reverse logistic practices controlled by RLMS.
2) Administration consolidation-Business’s that do practice RL are often doing so through heavy administrative allocation. Additionally, many companies are hesitant to enact RL practices because of concern of needing to adopt a large and costly administration. These companies need to understand that RLMS makes the majority of this infrastructure unnecessary by streamlining and automating critical functions.
3) Protected Income-Companies are often unaware of how much income is unprotected (i.e., at risk) because of seemingly uncontrollable factors that only come into effect after the product is on the market, such as returns and recalls. Companies need to understand that RLMS brings a large measure of control into their hands.
4) Liability protection-Many companies in diverse industries are susceptible and exposed to legal and regulatory action because from environmental and governmental regulations. RLMS allows companies to be up-to-date on regulations and also performs auditing functions that protect companies from investigations.
5) Resource reservation-Inventory, transportation assets, employee allocation, and other resources are wasted on improper RL practices. RLMS conserves and manages a company’s resources.
6) Time saving-Poor RL processes take too much time resulting in poor customer satisfaction and wasted money. RLMS streamlines and optimizes RL process time.
7) Customer Experience Improvement – OEMs and retailers can dramatically improve customer satisfaction through proper RLMS practices. Refined business practices, such as issuing proper credit for returns, fast turnaround on sending products back to customers, balanced books, and issuing replacements are some crucial and improved processes that are automated by RLMS.
These seven benefits of RLMS are crucial points that impact the deployment of new software solutions. Additionally, the size of the after-market for refurbished, returned, and other dimensions of the post-life of a product needs to be defined in able to establish the exact scope of RLMS automation required.
Earlier this year we released a major study which examined the State of the Art of Reverse Logistics Management Systems (RLMS). In the next several blog postings, we reference key learning’s from our study by looking at the challenges the industry faces with respect to bringing RLMS adoption to its full growth and development. Our analysis will highlight the most crucial problems as well as offer insight toward their solutions. In this blog we will focus specifically on how RLMS can effectively support and impact the efficiency of product returns.
Return management is perhaps the most “high profile” dimension of reverse logistics. However, a conclusive, standardized model of this service has yet to be created. In addition the progressive shortening of products’ forward life cycle, a built in and growing array of product obsolesces of products, high consumer demands, liberal return policies, and legal and cultural demands of environmental regulations, contribute to the difficulties of constructing such a model. The returns management model should incorporate the following eight dimensions into its system:
1. Workflow and business rules that process returns quickly from key channels in order to halt or decrease products value. The longer a product is out of the cycle the more its value decreases.
2. Ability to handle large volumes of returns with little advance knowledge of incoming amount of returns.
3. Accurate and current funnels of disposition points and their connecting branches.
4. Data entry points and reporting that enable real-time tracking of products through the supply chain. Visibility is paramount for both the company and the consumer.
5. Analytics to process data in order to inform tighter forecasting, gate keeping, and logistics management.
6. The ability to have flexibility is setting return policy, based on general trends and individual customer habits, through visibility, reporting, and tight BI.
7. Fraud protection against such scams as habitual returns and defense against free “renters”, i.e. customers who buy products with the intent to return them after functional use of them.
8. Accurate and immediate return entitlement validation facilitates customer satisfaction and also provides companies with accurate data for inventory, forecasting and logistical requirements.
Product returns have reached unprecedented heights especially when non-traditional retailing, such as catalog sale returns that can be as high as 20%, is factored into the total volume of global returns. Therefore, the re-evaluation of return management processes in order for companies and firms to run more efficient and cost-effective is necessary. Conversely, when returns are not properly managed, profits go unprotected; there are higher costs in processing returns, and missed opportunities for growth and development.