Performance measurement of the after-sales service network—Evidence from the automotive industry
Introduction
In a context of global competition and decreasing profits from product sales, the after-sales services and activities (i.e. those taking place after the purchase of the product and devoted to support customers in the usage and disposal of goods) constitute a relevant profit source as well as a key differentiator for manufacturing companies and resellers [1], [2]. Profit generated by after-sales services is often higher than the one obtained with sales; the service market can be four or five times larger than the market for products [3] and it may generate at least three times the turnover of the original purchase during a given product's life-cycle [1]. It is estimated that service networks in only four US industries – consumer electronics, personal computers, power tools, and vacuum cleaners – could generate revenues of $6 billion to $8 billion a year from after-sales service, parts, and ancillary products [4]. Besides being a long-term potential revenue source, the after-sales service constitutes a mean to uncover customer needs and a strategic driver for customer retention. It represents, in fact, “one of the few constant connections that customers have with a brand” [5] influencing customer satisfaction and loyalty. Finally, after-sales service is a way to allow a continuous improvement of product design and quality [6], [7], [8].
The perception of after-sales as a source of competitive advantage and business opportunity requires a shift from a traditional product-centric view, in which after-sales is considered a “necessary evil” [9], to a customer-centric view. Moreover, it requires the definition of a structured business performance measurement system. Since more actors are involved in the service chain, a consistent, integrated and multi-attribute system of metrics needs to be properly designed and deployed throughout the supply chain.
This paper discusses the peculiarity of after-sales service networks and processes and the implications on performance measurement systems. The paper aims: (i) at proposing an integrated framework for after-sales network performance measurement; (ii) at developing a case study research into the automotive industry in order to explore the performance measurement systems adopted, their strategic consistency, and issues of network relationships and communication. Therefore, the paper is structured as follows: the next section provides a brief review of literature about supply chain performance measurement systems and their applications to after-sales service networks, while Section 3 presents the reference model elaborated by the authors. Section 4 describes the after-sales service network in the automotive industry and illustrates two specific case studies, while Section 5 discusses the empirical findings. Section 6 proposes some concluding remarks, discussing the managerial and scientific implications of the paper.
Section snippets
Supply chain performance measurement systems
As observed by Neely [10], a dominant research topic in the 1990s concerned the development and deployment of balanced performance measurement systems. Scientific literature and industrial practice, in fact, addressed the integration of financial and operational measures in performance measurement systems, as well as the integration of long-term oriented metrics, related to strategic planning, with financial short-term oriented indicators. Balanced and multidimensional frameworks and
A reference framework for after-sales service network performance measurement
In the following, a new multi-layered performance measurement framework for the after-sales service supply chain is described based on the framework proposed in [39], which adopts a single company perspective. The framework aims at linking the strategies of each different actor involved in the after-sales service with their related performance attributes, levels and indicators, encompassing a short-term and a long-term perspective, as well as efficiency and effectiveness performance areas.
Methodology
Two case studies have been carried out, concerning the Italian after-sales operations of two car manufacturers. The automotive industry has been chosen for several reasons. First of all, the after-sale service in the European market contribute for up to 40–50% of total revenue, with a gross profit resulting from service (14%) and parts (39%) significantly higher than the one resulting form the sales of new cars [64]. Moreover, this industry is one of the most advanced among the durable goods,
Discussion
Companies 1 and 2 seem to cover adequately all the performance dimensions identified by the proposed framework, although adopting different PMSs, respectively the Balanced Scorecard and a self-developed PMS. At an internal level, moreover, both companies show a link between corporate strategic objectives, after-sales goals, and after-sales performance measures and indicators.
Both companies also adopt a supply chain perspective in performance measurement: in addition, company 2 developed a
Concluding remarks
The paper explored the performance measurement systems in supply chain and networks, with specific reference to the after-sales services of manufacturing companies. Although recognized as a significant source of revenue and profit, after-sales and in particular its performance measurement system has not been thoroughly addressed by management research as well as industrial practice. The first aim of the paper was, therefore, to propose a reference framework for the performance measurement of
Acknowledgments
This work is a result of a two-year Italian research project, named after-sales advanced planning (ASAP), undertaken by five Italian universities. The authors acknowledge the financial support received from the Italian Ministry of the University, Scientific Research and Technology (MIUR). For more information about the ASAP Project, please refer to the official web site: www.progettoasap.org.
Eng. Paolo Gaiardelli is a researcher in the Department of Industrial Engineering of the University of Bergamo. He is assistant professor in operations and industrial plants management. His main research topics are logistics and operations management, with a specific interest in the field of after-sales services.
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Eng. Paolo Gaiardelli is a researcher in the Department of Industrial Engineering of the University of Bergamo. He is assistant professor in operations and industrial plants management. His main research topics are logistics and operations management, with a specific interest in the field of after-sales services.
Nicola Saccani is a post-doc fellow at the University of Brescia (Italy), where he received his Ph.D. in operations management in 2005. He graduated in industrial engineering at the Politecnico di Milano (Italy) and at the Ecole Centrale de Lille (France). His research topics include production planning and control, buyer–supplier relationships and the configuration and management of after-sales services.
Lucrezia Songini is a lecturer at Bocconi University, Milan and senior faculty member of the Accounting and Control Department of the SDA Bocconi School of Management. She is professor of management accounting at the Università degli Studi del Piemonte Orientale “Amedeo Avogadro”, Novara, in the Business Administration Department in Casale Monferrato. Her main research topics are strategic cost management and performance measurement and evaluation, with a specific interest in the field of after-sales Services.