 All manufacturers and retailers want to maximize repeat sales by retaining the loyalty of their customers. Traditionally they have sought to achieve this by not only providing high quality value for money products but also providing similar quality and value in their after sales service. In so doing, they hope that customers will remain happy with their brands and return to them when it is time to replace an item with a new version.
However, while this two-pronged approach for customer retention may gain corporate commitment at the strategic level, in practice manufacturers are inclined to focus on the profitability of their production and distribution, and retailers concentrate on increasing turnover through their stores.
For many organizations service has been viewed as a ‘necessary evil’ rather than an activity they consider core to their business success. Service managers in such organizations often struggle to justify investment in service systems or additional service personnel. CEOs of manufacturing companies argue that investment in higher quality products will result in less demand for service so why should they improve their service infrastructure? Retailers prefer to sell replacement items rather than fix a broken one, and if a new item breaks they will just send it back to the manufacturer.
Many organizations have struggled with providing profitable after-sales service and have reached the conclusion that service is not their core competency. They are now looking for alternatives. Fortunately for them independent service provider networks can now provide low cost high quality service in a way that allows manufacturers and retailers to maintain control of the relationships with their customers.
Independent service provider networks have long been established in the brown and white goods industries. Here service organizations struggled to provide satisfactory service levels in periods of high demand or in geographically remote areas where customer density does not justify their own full time resource.
For these exceptional circumstances manufacturers and retailers turned to small, local sub-contractor organizations to handle volume overloads. In these industries, in most western countries, an established network of independent service providers evolved, and large service organizations were able to turn to them in times of need.
The independent service provider was useful for exceptions, but few large organizations were willing to rely on them to handle their main business volumes. They didn’t have the systems and infrastructure to provide the manufacturers and retailers with the service level guarantees they required; and they couldn’t provide visibility of their availability or real-time feedback of their activities to be able to support the required levels of responsiveness or accurate traceability. So the manufacturers and retailers persevered with their own service workforces.
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