Original equipment manufacturers (OEMs) face a challenging and evolving future in the face of services-driven sales models and ever-changing technologies. Customers expect everything-as-a-service delivered on a monthly subscription — from the technology they use to the software they run to aftermarket repairs, too. In response, OEMs have incorporated service delivery into their business strategies. And they’re already seeing positive results. An analysis across 30 industries showed that the average earnings margin for aftermarket services was 25 percent, compared to 10 percent for new equipment sales.
Repair services are a necessary part of the business for modern OEMs, and these contracts represent a significant potential revenue stream. However, offering repair services as part of in- or out-of-warranty support requires skilled technicians, specialized equipment, certified facilities and integration with an efficient supply chain equipped for parts procurement and customer delivery. The cost of maintaining these services can impact an OEM’s repair revenues. By outsourcing to a certified, skilled repair services vendor, OEMs can reduce costs in four key ways that help them provide greater value to their customers.
1. Grow Your Services Revenue While Reducing Capital Requirements
Repair services require highly skilled technicians, logistics and project management and support staff to maintain support contracts and supply-chain integration. These teams need dedicated facilities, including labs, warehouses and office space. As your technology advances, those teams must be kept up to date and certified on both existing and emerging devices. But the overhead for managing a large repair workforce can quickly overwhelm profitability.
An experienced repair partner that covers the complete service lifecycle of IT products brings the personnel expertise and specialized equipment you need. Additionally, these skilled engineers and technicians renew the certifications they need to work on technologies based on past and present architectures. By utilizing trained teams from a trusted partner that is ready to offer holistic services across a breadth of technology, you can reduce training spend for your in-house staff while providing a wider variety of repair services to your customers.
2. Increase Retention with Improved Customer Trust
Customer confidence and brand reputation rely on high-quality repairs delivered within agreed-upon service level agreements (SLAs). While OEMs often depend on channel sales to facilitate services delivery, studies show that having high-touch, high-quality post-sales relationships directly with the customer helps improve profitability. A McKinsey & Company analysis of more than 40 OEMs across ten industries reveals that the OEMs that relied solely on channels had attached rates ranging from about 30 to 50 percent, compared to 70 to 100 percent for those that worked directly with customers1.
Partnering with an experienced repair vendor means access to dedicated global repair teams. These teams act on your behalf as an extension of your company, providing a seamless customer repair experience. The right repair services partner will adhere to your SLAs, repair standards and quality control practices for all repairs. They should also coordinate the entire repair lifecycle, including customer management, tracking, reporting and shipping logistics. This seamless experience improves customer trust and increases retention, resulting in higher rates of the contract renewal.
3. Gain Access to an Established Global Infrastructure
The globalization of businesses introduces significant logistical challenges for OEMs offering repair services. To keep up with customer demands for rapid services, OEMs must maintain repair facilities across the globe, complete with warehouses stocked full of parts in each location. The wider spread an OEM’s customer base is, the more expensive repair services may become.
By working with a global services vendor, you can reduce costs while providing high-touch, rapid repair services in more locations around the world. Additionally, a repair partner that is tightly coupled with the supply chain can further accelerate your repair services no matter where your customers are located. Depending on your company’s reach, the right partner can offer parts delivery and services within hours, rather than days or weeks. By leveraging an established global infrastructure, you can improve customer satisfaction, services profitability and brand reputation and loyalty, all while spending less on warehousing and logistics.
4. Focus on the Future With a Single Services Provider
OEMs manufacture and deliver technology innovations that support their customers’ businesses around the world. Offering services such as repair improves profitability, but it can also take time, effort and investment away from your strategic initiatives. Similarly, managing multiple vendors for repair services and supply chain logistics can stretch your internal resources.
By working with a single services provider that has state-of-the-art repair facilities and logistical management of both the repair cycle and the supply chain, you can simplify the management of your repair program. Make sure your provider can track and manage all products, inventory pieces and repair orders, and give you full visibility at every step. By partnering with a single expert repair vendor, you reduce your involvement in the process, helping you to release your human capital and investments so your teams can focus on the road ahead.
Whether your company manufactures data centre technology, endpoint devices, peripherals or speciality-embedded technology, Tech Data Global Lifecycle Management’s (GLM) comprehensive, certified repair services cover the full spectrum of products. With repair services in every region of the world, you have access to the infrastructure you need to reduce your overall operational costs while meeting your customers’ expectations for high-quality services.
As a single vendor for repair and related services, GLM offers root cause analysis, repair, quality testing, packaging and shipping, supply chain logistics, project management, customer management and more. And with complete visibility into the repair process, you know exactly what’s happening with your customers’ repairs while still having the freedom and funds to focus on your next big project.
Are you ready to improve your repair services offering for in- and out-of-warranty support while reducing capital costs? It all starts with a conversation, so let’s talk.
 McKinsey & Company, “Industrial aftermarket services: Growing the core,” July 2017, https://www.mckinsey.com/industries/advanced-electronics/our-insights/industrial-aftermarket-services-growing-the-core