The service supply chain battlefield - Part One: ‘no man’s land’ takes centre stage...

May 21, 2014 • FeaturesLogisticscentrex servicesglyn dodd

Glyn Dodd, Managing Director of Centrex Services returns to Field Service News with a new two part feature that outlines his battle plan for the service industry...

“The secret of great battles consists in knowing how to deploy and concentrate at the right time.” - Napoleon Bonaparte

Some of the most significant changes that technology has delivered over the past few years have changed the approach to most markets, but for the break-fix market, it has come to a point in its evolution that has placed it on the brink of turmoil. At the heart of the technology support industry, field engineering and the associated service supply chain is emerging as the new battlefield.

The advancement of the industry is emerging as an issue now because technology products have been simplified, the need for traditional, high-end engineering skills required in the field is diminishing - almost to the point of extinction. The result is that continued market pressures are pushing the legacy fragmented technology support - the service supply chains - into a non-competitive position.

This has come to a head as customers no longer require high-end expertise to repair retail, hospitality or print technology; the priority is to replace the unit in the shortest time possible, ensuring an immediate return to productivity at the lowest possible cost.

When compared to wider innovative technology development, the break fix market remains fragmented and stagnant, having progressed over the years into silos which have operated in ivory towers. Evidence of this is seen in major contracts where the supply chain for a single IT hardware call involved one service provider sub-contracting to three different repairers, three individual logistics loops, two technical couriers and three parts providers.  These businesses are refusing to modernise the outdated service supply chain model currently plaguing the industry.

Where’s the battle?

This reluctance to change the way businesses operate and think is harming the technology support industry, and I'm afraid to say that I believe the worst is yet to come.

Hardware technology is always evolving yet the support business is stuck using an antiquated supply chain which hasn’t offered true value or innovation to the customer for years.

There is a distinctive, yet variable change in the approach and structure to the service supply chain.  The level of skilled expertise required to service complex technology is still necessary, while the traditional ‘swap’ services can continue to be handled by a technical courier. Between these two skill sets is where he I see the true battle – the middle ground.

The middle ground’s effect on service

So what is shaping this battle and what are the components that have put this service provision into a state of flux?

Well, the first major component of the battle lies in the price structure of hardware maintenance support.  We’ve seen hardware technology commoditise, which has changed the perceived value of product hardware and the way that it is serviced. This has increased the price pressure within the middle ground.

The second component (and possibly a result of the price pressure) is the accelerated silos of multiple suppliers throughout the supply chain, increasing the number of ivory towers and the chasms that exist between them. The number of suppliers and subcontractors involved in a single IT hardware support has culminated in fragmented, confused and complex supply chains.

The third and probably one of the most key constituents of the middle ground is the price of engineers, as service suppliers can no longer afford skilled field service engineers to respond to low level incidents.

As the nature of field service is changing, it’s rendering the current field service model outdated and expensive. Using technical couriers is the favoured method of replacement rather than a traditional engineer; however, using the full potential of field service engineers within the emerging middle ground activity is now becoming a waste of skilled resources and fails to offer true value to the customer.

As highlighted, end-user pricing associated with field services is decreasing, but price-pressure in the legacy model, including the deployment of engineers isn’t. The average engineer’s salary is currently reaching £34,000, substantially higher than the emerging middle ground technician who earns £20/25,000. The industry simply can’t afford to support field service engineers working at this level, despite their vast expertise. As price-pressure rates continue to fall, this issue is only going to get worse.