Daniel Brabec and Coen Jeukens of Servicemax reflect on the financial impact of the global lockdowns on th efield service sector. 

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The Falling Dominos of the Field Service Supply Chain: 

There has been a lot of discussion about how the financial recovery may look since the pandemic hit. Initially, there was some optimism that as deep as the blow was to the global recovery we could see the economy bounce back in almost the same measure. Indeed, the economic analysts are largely predicting an upturn in US GDP of around 20% which would be the largest quarterly rise in history. Yet, this is positive momentum must of course be held up against a historic 33% contraction in the second quarter of 2020.

Perhaps the best description of how the economy may return to pre COVID levels is the ‘Nike Swoosh’ curve – a steep and steady drop followed by a more gradual and controlled return.

Ultimately, the impact of the global lockdowns has had a massive impact on economies across the world, and field service organisations have felt this challenge as much as any other industry, as the customer ecosystems that they operate within have been hugely effected. The domino effect of a crashing economy has hit service organisations hard.

Fundamentally, we all know that for the short to mid-term at least there is going to be a lot less there's going to be less cash in the market. However, the precedents of the past have shown that often in an economic downturn it is service delivery that will thrive as assets in the field are sweated that little bit longer – meaning the service and maintenance contracts required to keep those assets operating at full capacity become in greater demand.

"There's a whole knock on effect across all industries where companies are affected in being able to collect that revenue in line with the standard service the cash cycle..."

- Daniel Brabec, ServiceMax

“I think we have to look at a couple of pieces,” commented Daniel Brabec, Vice President, Globat Customer Transformation Services, ServiceMax during the last Field Service News Think Tank Quarterly Debrief.

“From the financial perspective, some companies such as those in med-tech sector are companies you would think are doing fantastic simply there's such a high need for their services at this time. However, you also have to consider whether or not their customers can pay them.

“There's a whole knock on effect across all industries where companies are affected in being able to collect that revenue in line with the standard service the cash cycle. So the question is what are these companies looking at in terms of bringing revenue back into the business to invest? I think Alec [Pinto, Leica Bio-Systems] really hit the nail on the head there in his in his comment about revenues being tied to fixed services.”

This is an important point and one that was discussed heavily during a Think Tank session that was centred around the initial impact of the pandemic. Will there be a requirement for rethinking the way we approach developing our service contracts and indeed our very service offerings as we try to adapt to the new normal?

“We need to see a shift and we will see a shift,” Brabec continues.

“I think for a lot of organizations if they want to thrive in the future the shift will be towards outcome based services. This is because you are working with a customer and end user and have a contract with them where you're guaranteeing certain levels, you still have that contract. It's not going to be impacted as much as a contract on a time and materials basis.

“Moving forward, I believe you're going to have a lot of organizations shift more toward that model out of pure necessity - they won't be able to survive if there were continued pandemics or any other issues that might arise in the future that could potentially limit their cash flow. So, companies will have to think of other ways to have that that recurring revenue that adds long term annuity streams that will help your business not only weather the storms but continue to thrive and grow into the future,” Brabec adds.

“I think this entire pandemic has showed us that we have a large vulnerability with the way we have set up our supply chains with a lot of manufacturing happening offshore..."

Coen Jeukens, ServiceMax

Of course, with the question of both customer supply chains and restricted funds within the market another big question we must address now is whether the service supply chain and spare parts logistics is robust enough to survive a second wave of lockdown should the pandemic rear its ugly head once again.

“I think this entire pandemic has showed us that we have a large vulnerability with the way we have set up our supply chains with a lot of manufacturing happening offshore,” reflected Coen Jeukens, Vice President, Global Customer Transformation, ServiceMax during the debrief session.

“If we go back to our customer base, we see that customers have organized their supply chain in a certain way because that was the most efficient way under the legacy model, because we couldn't conceive something like this would happen. Now we know and Daniel already mentioned the business continuity plans, those continuity plans, couldn't even foresee this happening. I think that right now with these new insights, we will rethink our continuity plans, and we will start preparing for it,” Jeukens adds.

So, could this be the impetus for a more widespread adoption of 3D printing? Particularly within the spare parts arena?

“I do think that in certain cases, it is possible to use 3d printing to print spare parts - it is possible but for other parts I think we do have to rethink, maybe we have to go back to the CFO and say, ‘well, you had an inventory reduction program, but if we look at our recovery process, we might have to invest in additional stock.” Jeukens comments.

“Alternatively, it may be the other way around. Maybe you have sufficient stock but you have certain technicians are hoarding spare parts in case of another supply chain failure. For me it is essential that companies invest in the visibility in their own infrastructure to see what technician is ordering and who's consuming it.

“Then, even if you have a shortage of material, then you should rethink from a prioritization perspective. What particular break-fix type of situation really warrants you to use one of those very precious spare parts instead of just fixing a piece of equipment for a machine that doesn't really have a criticality in a customer context? I think that revisiting those business continuity plans, rethinking the supply chain, see in what areas 3D printing can alleviate the pain, is an important undertaking for service organisations at this moment,”

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