Service Parts and Drop Shipping: “It’s a blend of art and science”

“It’s a blend of art and science. Technology is the science. The people and the processes are the art. Innovation is tied together with customer expectation. Our job is to make the service and repair experience as seamless and timely as possible for the customer,” says Tom Giovingo.

Tom is our Director of Strategic Accounts. He has been at FIDELITONE for 30 years and is our resident expert on the service parts industry. He shares insight on how the service parts industry has changed over the years and how drop shipping can speed up the supply chain of parts for US based companies.

What is service parts management?

Service parts management is the supply chain for service parts for a given product category. The process ensures that the correct spare parts and resources are at the right place at the right time in order to repair a customer’s finished product.  In most cases, service parts are provided by the original equipment manufacturer (also referred to as the OEM). FIDELITONE offers a full solution for service parts management, including inventory forecasting, procurement, order management and vendor management.

There are two approaches when it comes to service parts management:

1. For a technical repair, we get a part from the manufacturer and send it to a service center or technician. For example, a high-end appliance that needs a replacement part might be serviced by an in-home technician.
2. We send a part directly to the end consumer for a less technical, minor repair that they complete on their own. This has become increasingly common in recent years as the DIY world becomes more popular. If it’s a dish rack for a dishwasher, we ship that directly to consumers.

FIDELITONE also warehouses parts inventory and picks, packs, and ships to the end customer, technician or service center.

We often manage the entire service parts supply chain to ensure a seamless experience for that end customer. “We do inventory forecasting for demand planning, we integrate with the vendor to order a part and then ship it to the customer,” says Tom.

A standard, repeatable process leads to a great experience for the customer.

Our ERP (enterprise resource planning) system helps us manage the item database and item price for multiple vendors’ parts. FIDELITONE’s supply chain technology solutions allow us to shop orders with multiple vendors on behalf of our clients. The ERP provides visibility to inventory across warehouse and integrated vendor locations and shops the order based upon business rules established by our client. Then, the order is released to the warehouse or vendor for shipment. The entire process is automated from PO (purchase order) creation to invoice payment.

“The flexibility we have with integrations for both clients and vendors is unique. We may conduct business with a manufacturer using one file transfer protocol and use a different protocol with our client,” says Tom.

Drop ship and order management help ecommerce companies quickly meet increased demand.

Organizations are beginning to leverage ERP and integration technology solutions outside of service parts to facilitate orders from multiple locations. This helps companies optimize inventory investment and creates a lower barrier to entry for ecommerce business to expand their product line and grow revenue.

Drop shipping is an order management technique that allows companies to offer products that they may not have in inventory so they can grow their ecommerce sales. Our order management technology leverages capabilities of vendors who can ship direct and simplifies the order process so they can scale.

An integrated network of drop ship vendors can also apply to multiple supply sources. For instance, FIDELITONE has a wide supplier network and relationships with OEMs, manufacturers and distributors. If a customer needs a part and the inventory is unavailable at the primary vendor, the technology can shop the part with a secondary source to find it quickly and ensure a positive customer experience.

“The takeaway is that alternate suppliers are already integrated so when there’s a need to secure a part, we’re not scrambling,” says Tom.

Know your customer and how to meet their expectations.

“Customers are repairing less today than they have in the past,” says Tom.

Customers now expect lower price points and instant gratification in certain product categories like electronics (TVs, cell phones). Oftentimes, this means product features are limited to meet those expectations. Consumers who don’t want to wait for a repair service are also more likely to buy a new product due to the lower price point.

On the other hand, there is a growing set of consumers who are willing to pay a little more for enhanced features or a quality product that will last. “Do I want to buy a $200 vacuum that breaks every two years? In that case, spending more for a higher-end vacuum might be worth it,” says Tom.

Industrial categories that produce more expensive medical equipment or even airplane engines still have a high need for repair parts. “We have supported 18 different product industries during my time at FIDELITONE,” says Tom.

The aftermarket affects your brand’s reputation and customers’ willingness to buy from you in the future. You no longer have just service technicians ordering parts. You have consumers ordering replacement parts directly and they expect faster delivery.

Coronavirus has also changed consumer behavior.

It’s always important to understand what products people are buying right now and why. Buying patterns have changed with people sheltering in place. According to a report by Technavio, the DIY home improvement market will grow by $143.3 billion during 2020-2024.

“Any product categories related to home or outdoor recreation are picking up. BBQ grills, hot tubs, and recreational vehicles,” Tom explains. Many of these products in the recreation category fit a repair model – customers may need replacement parts for their grill. With the growth of ecommerce and DIY product categories, there’s also a growing sector of consumers that have a sustainable mindset. These consumers may choose to repair a product instead of buying a new item, leading to growth in the service parts industry.

We’re here to help you navigate the ever-changing ecommerce landscape.

Our cataloging technology makes it easier for customers to navigate your products and find the right part to order in the least number of steps.

That paired with our order management and drop shipping processes can help scale your business while providing a seamless customer experience. We’re thankful that Tom and other experts on our team are here to guide clients in this fast-paced environment. Contact us to learn more and consult with one of our experts.