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It can make or break your service business growth strategy, yet it’s surprising how many service leaders do not appreciate the impact a separate service P&L can have on changing the mind-set of their people.

Many just focus on what they believe is the best way to maximise their corporate value. Yes it’s important to ensure we have the systems to manage the value of our enterprise, but we also need to consider the impact of measures on the performance of our people.

Take Textron Fastening Systems who were a $1.8bn global manufacturer of nuts, bolts, rivets, screws and plastic clips. Their European business became the sole supplier of fasteners to the Ford Fiesta, providing an integrated solution consisting of manufacturing, purchasing, logistics and engineering services. As far from their manufacturing core, it was set up with it’s own P&L and dedicated team. They succeeded due to their focus and separation from the main manufacturing business.

But once this $30million service business was stable, we decided to re-integrate it back into the core business. So a dedicated team, was re-deployed back into the operational silo’s of Engineering, Logistics, Purchasing , IT and Sales. What a disaster and I say that as this case study is from my own experiences. We lost focus, drive, energy and sales. Our biggest competitor, who set up a separate service business, grew to 5 times our revenue, from exactly the same starting point in time and experience. 15 years on the Textron Fastening Systems no longer exists, having been bought by Private Equity and then broken up. Ironically the remains of the service business have survived but without growth.

For me this was a very salutatory lesson about the importance of focus. But its not so simple as saying that for an industrial company to succeed you must have a separate P&L or Business Unit.

It depends on the strategic goals of the business and also where it is in the transformation process. For example companies such as Rolls Royce & BAE with over 50% of their revenues from services see it as such an integral part of their business model, they do not have a stand alone services division.

So if you are pondering how best to manage your corporate value and looking to make the profit/cost centre call, you might ask yourself 2 questions:

1. In your future business model how integrated will be your products and services offering.
2. Is organisational focus the key challenge facing your service transformation programme.

Having a sound service strategy is key to make the transformation to a sustainable high growth profitable service business. If you want to read  more about how real companies achieve this goal, you can look at the Bobst case study on www.noventum.eu

Read part one of this series, Creating value through services: Where to Start? here  

Read Part Three of this series, Finding nuggets of customer gold here

 

Whilst building a service business entirely from scratch might seem like a dream for many Service Managers when facing the trials and tribulations that are often the result of many legacies, it is none the less a daunting task and certainly no mean feat. However, for Daryll Brown, Operations and Service Manager with Bürkert Fluid Control Systems this was exactly the task he was employed to do. In this exclusive interview he explains just how he has approached building a service division from a standing start... 

 

FSN: Building a service business from scratch must be both a daunting and exciting proposition, what was the approach you adopted in taking the first steps to achieving this goal?

DB: Our approach to building a service business from scratch is to first of all define what can be thought of as service in our industry. 

Fluid controls are a very complex business and there is not a clear description of what is traditionally known as service work.  We need to define what we class as service work and then develop products that would be attractive to our customers.

Some of our definitions of service include Installation of Bürkert products and systems, continuous service of Bürkert products and systems, planned maintenance and breakdown cover for Bürkert products, installation and commissioning, consultancy, design, calibration and training.  As things stand most of our products do not lend themselves easily to service maintenance.  This is because there is not always what you would call spare parts that need to be replaced.  Also a lot of our products are designed for one time use and they may last for years.  So we need to be very creative with our offering.

FSN: What approach have you taken to scheduling software, are you using a manual, automated or optimized system? Why did you take this approach? Which provider are you working with and what made you choose them?

DB: This is unique for us as we do not necessarily need scheduling to cope with high volume demand we need it more to manage our complexity.  Having had experience in implementing field service software in my previous company I knew that the generic service software packages out there were not going to be as flexible as we would like.

Most offer an out of the box solution which never seems to do exactly what you need.  You then seem to spend time (and money) on modifying the software to meet your needs.  I think a lot of software companies fall into the trap of thinking all service businesses are alike.

For us this isn’t the case so we have decided to develop our current quality and asset management software (Q-Pulse) to be able to manage our service work.  This has the added advantage as we are already very familiar with the software and we have a lot of scope to develop and modify to suit our needs.

FSN: What logistics solutions do you have in place to ensure that your field engineers can get the right parts as soon as possible?  

DB: As mentioned our service work is quite complex and some visits have to be planned months in advance.  This gives our logistics team time to plan when and where our parts can be delivered and stocked.  Bürkert’s UK core business is mainly distribution of product from our Plants in Germany and France so we are already well versed in managing the logistic supply chain.  When the business grows we will need to think of innovative ways of supporting our service teams with some of our faster moving items.  Again from past experience I have found that having a partnership with a flexible logistic partner is worth its weight in gold.

FSN: How are you monitoring driver behaviour? What tools are you using (GPS, telematics etc)?

DB: Roads in the UK are becoming busier and this presents a challenge for any service business.  We have put a lot of thought into using the outside of our service van to market our business and products so we do not want our drivers to give us a bad name.  So we have had all those who drive our van read our companies driver handbook and then sign a declaration that they will comply.

We have also made this an agenda point at our Management review as ideas have been raised regarding advanced driver courses.  This would have the added advantage of potentially lowering insurance costs.

We do not have this issue of needing to know up to the minute the location of our Engineers.  Nor do we currently have any trust issue which would warrant GPS tracking.

FSN: Who else within the organisation do you liaise with when making decisions that will impact upon how the service department operates?

The Bürkert UK business is ran by a small Management team of five members.  These represent areas such as General Manager, Logistics, Finance, Quality and Sales.  Due to our business structure and all of these areas need to be involved in the decision making process.  As we are only a small business here in the UK every action has a reaction and this means all departments have to work closely together.  As past experience has taught me this is no bad thing.  For me even in larger organisations if all departments are working closely together and not in silos key decisions revolving around the service business are made more quickly and effectively with less risk.

FSN: Have you been able to integrate the service division with other divisions within the organisation such as sales or client services? What challenges did you face?

DB: We are still in the early days of developing our service business.  For now our project engineers are also doubling as our service engineers.  This is not necessarily a bad thing as we are starting with our service already integrated into other areas of the business.

For me all areas of the business working closely together is critical.  All processes tend to cross over into different areas of the business and often this is where most processes come unstuck.  If ran as a process and not a interlink of different activities in different areas the service business will run a whole lot better. For instance in the past I have often been called to meetings with the logistics departments to complain about the amount of stock in the service business.

If managed as a process then the logistics teams who are setup to manage other needs of the business can account for the service business. This will help them to adjust themselves to meet the completely different demands of service.

FSN: You personally also have a wide skill set holding an advanced certificate in Sales and Marketing (Institute of Marketing Management ILMM 2007). What led you to a career as a service management professional? What are the key skills that you think are required to be a good service manager?

DB: I spent 24 years with my pervious company and I worked in several different departments including operations, quality, sales and customer service.  This gave me a good understanding of the overall business and a good grounding in organising teams and coping with different demands.  For this reason I think the senior management thought I may be a good choice as a service manager.  Service has been by far my biggest challenge as it seems to involve so many variables and crosses over more boundary lines then I had seen before.  In my old business service was managed as part of the sales business.  If I were still there today I would have definitely recommended managing service as a separate cost Centre. This is because the needs of a service customer are completely different to that of other customers.  This should be managed by a focused service team with no distractions and to key performance targets that are service related and not just sales related.

FSN: What are the biggest challenges you think the field service industry faces and how have you set up the service business at Burkert to overcome these challenges?

DB: Of course there a different types of service businesses which will face different challenges.  However, there are challenges that are generic and affect all service businesses.

For me one of the biggest challenges is the modern lean business trends.  This drives a cost cutting culture in all industries which makes customers demand more for less. When you are selling service there tends to be a lot less overhead to play with.  One extra day on site due to an unforeseen issue and your margin disappears. So at Bürkert our way of overcoming this issue is preparation (and lots of it).

Planning needs to accurate, costing needs to be accurate and the timing needs to be spot on!  This is of course easier said than done.  So to endeavor to make this happen as mentioned before we have developed our software package to effectively manage our service business.  Our logistics are integrated with our service offering so that we have the parts available when our customers need them.  All areas of our business are part of our decision making to facilitate us managing our service as a process and not as a group of individual activities.

However, we know we cannot afford to sit still we need to look for ways to continually improve our service offering.  For this reason our marketing team is working closely with our customers to keep up with the latest developments in our market.  We have put together key performance indicators that are based on areas that our customers value.  We hold regular improvement events to review the feedback that these items give us so that we can continue to develop our business to be customer focused and deliver value.

Bürkert  at a glance:

Industry = Fluid Controls

Number of Field Engineers UK only = 3 (these also double as Project Engineers).

Number of Dispatchers = None (not set up as yet)

Average number of jobs per Engineer = 1 (our work is quite technical)