Supply chain software: Servigistics and the service parts supply chain

You need a family tree to keep track of who owns whom in the supply chain software business today. Back in 2001, when Modern did it’s first annual look at the industry leaders, there were enough significant players just in the warehouse management space (WMS) to create a top 25 list.

Today, that’s a top five list, as former big fish like MARC Global, Provia and Yantra have been swallowed up by even bigger fish. We’re now in round two of the consolidation, where the bigger fish get swallowed up by Jonah’s whale. Yantra, for instance, was purchased by Sterling Commerce, a division of AT&T, which has since been purchased by IBM.

Optum, one of the first of the WMS providers to provide supply chain execution functionality across a complex supply chain for contract manufacturers, is another example. First, it was purchased by Click Commerce. Click, in turn, was picked up by Illinois Tool Works and then sold to a private equity firm. More recently, Click joined forces with Servigistics ([url=http://www.servigistics.com]http://www.servigistics.com[/url]). Got all that?

Just in case, I talked to Mark Vigoroso, senior vice president of global marketing and alliances for Servigistics, to find out how the two companies will work together.

Over the years, both companies have carved out a niche in the service parts supply chain. Think of it as lifcycle management of parts for machines and other products that have a long life and may be repaired often. An airliner or a battle ship is a perfect example. Both may be in service for fifty years – as may a press on a manufacturing line. All three will be repaired over and over again during their lifetime.

While materials handling and the supply chain are often defined as having the right part at the right time at the right place and at the right price, for service parts those are really critical to keeping equipment, like an aircraft, up and running. How many of us have had a flight grounded or cancelled because an airline was waiting on a part – often something that seems inconsequential, like the right wiper blade. It annoys the heck out of travellers like us; it costs the airlines millions.

For years service parts providers operated a just in case model, with a lot of inventory hanging around to make sure they have what they need when they need. But that’s expensive. If you can do a better job of forecasting your demand for parts; what you need to have on hand to meet service level agreements; where you position your distribution centers and your parts based on the areas you service; and then put in place order fulfilment and transportation processes to respond to demand, you can reduce the amount of parts you have on hand. It’s almost like a just-in-time manufacturing environment, with the exception that there is a lot of unplanned demand in service parts. You open up a machine to change a filter and find out the pump is about to go. Whatcha gonna do? It’s a supply chain all unto its own.

Servigistics made its name in the 90’s as a service parts planning optimization provider to help answer some of those questions. They provided solutions that helped organizations better predict what parts they would need, where, when and in what quantity. Later, they added field management capabilities as well as pricing.

Click Commerce also had demand planning. And, with Optum, it had the collaborative platform to hook up trading partners and the warehouse management capabilities to manage inventory, provide visibility and direct order fulfilment processes. The combination of the two companies in June 2009 brought together the best of both worlds: the ability to do better parts management around real demand, along with the supply chain execution components to fulfil an order – supply chain collaboration, visibility and warehouse management functionality.

More recently, Servigistics purchased Kaidara, a provider of service knowledge management software – that’s a fancy way of saying we want to know what best practices are working for the field service and customer support representatives. They also purchased a provider focused on the production of electronics parts catalog.

“We are positioning ourselves as the platform for service lifecycle management,” says Vigoroso. “That means solutions to manage parts, knowledge about those parts, content and then the logistics to move them. As we move forward, our story is that we can help the OEM and their service partners manage their processes as a lifecycle. They can forecast the total cost to serve a piece of equipment or a customer more accurately and manage their overall service margins.”

In some respects, it strikes me that with companies like Servigistics –they’re not alone – we’re seeing the B2B exchange vision that we wrote about ten years ago during the Internet boom finally coming together. Vigoroso would agree, with some caveats. “The classic B2B exchange was going to connect buyers and sellers,” he says. “It was 100% focused on selling a manufacturer’s content management. Today, supply chain functionality is a bigger suite of capabilities than just connecting buyers and sellers. Functionality is part of a bigger suite of capabilities. There’s a synergistic value that comes from looking at service as a contiguous set of processes.”

He adds, “Our play is that our solution allows you to optimize the service parts lifecycle in a way that allows you to compete through service and execute as a strategic operation. It all adds up.”