This section introduces business concerns of service organizations that may differ from those in the rest of manufacturing. Concepts are presented in the order they typically occur during implementation. Later chapters explain the concepts in more detail.

The first business decision in service is what you are going to service. Will you service only what you make or also items manufactured by other companies? Will you service only items you sell directly or any item you manufacture, regardless of the distribution channel producing the sale?

A key concept in these decisions is the installed base. An installed base record matches end users with specific items and can control service policy. Whether you decide to service only the installed base or some other mix of items shapes your service business.

Once you decide what to service, you decide how much service to provide. What level of service are you providing and for which situations? A level of service typically is a percentage of either labor, item, or expense service costs.

Typically, you explicitly limit service in terms of time and total service cost. The level of service and its limits represent the level of coverage. How much is an item covered for, and for how long? Does this coverage include replacement parts, labor, expenses for on-site visits, shipping?

Defining the level of coverage helps you effectively manage extra charges, as well as billing for labor and costs not covered, or partially covered. Service limits help you distinguish billing for different aspects of service, such as labor, parts replacement, and service expenses.

Service limits can include time limits, overall cost limits, and limits for specific items. For example, in SSM, you can set a maximum amount of service—all costs up to $1,000—limit coverage for a category of work—labor up to $1,000—or limit service on specific items—drive train not included.

You define and control service coverages by an agreement with your customer. This agreement states explicitly the level of coverage you are providing and takes the form of a warranty or a service contract.

A warranty typically does not produce revenue and is shorter in duration than a contract—often measured in days. You usually do not renew a warranty. Instead you replace it with a service contract.

Service contracts usually produce revenue, work over a longer time—often months or years—and are often renewable. Both warranties and service contracts explicitly state the level of service and its limits.

Service activity flows from the obligations in the warranty or service contract and continually refers back to these agreements when determining service response and billing.

Service organizations usually have separate pricing. A manufactured item needs a price list for service as well as sale of the item. Organizations selling service contracts need price lists for contract coverage and for service activities.

You may also need price lists for returned items you repair or refurbish and send back to customers. If you give credit for returns, you probably do not want to offer full price for the used item. A credit price list with lower prices takes into account the wear or age of the returned item.

Since service contracts generate revenue, you need to decide how you are going to bill for contract coverage. The primary decision is whether to bill for service before you do it, or after. There are advantages and disadvantages to each approach, depending on the type of service. Also important is how often you bill, or the billing cycle, which determines when invoices are generated. Billing after the fact is called billing in arrears.

Once you define what you are servicing and how much service you are providing, you need mechanisms for managing that service activity. You usually manage service and support activity through calls.

A service call may mean a phone call from a customer, a service visit, a call by a field technician, or any other contact with a customer or potential customer. A service call is contact that generates a service response, even a brief response to a customer’s question.

The call labels the service situation, and call management provides processes and tools for managing the service contact. You close a call when you have resolved the customer’s service problem.

Calls can reflect a broad range of issues and problems. Part of call management is tracking the actions taken by an engineer to resolve an assigned problem. This includes recording the hours and kind of labor performed, any expenses incurred, and any service items consumed or returned.

This detailed record of activity is the basis of call billing. Service may be covered by a warranty or contract, or you may charge for it. Some organizations offer fixed price service. In this case, you charge a single, predetermined price for the service activity, regardless of the actual cost of time and material. An organization may choose to cover part or all of the cost of service as a goodwill gesture. These scenarios represent different ways of charging for service that tie into accounting and invoicing.

Many service organizations require a quotation process in selling services to prospective customers. Quotations state the cost of a service contract or the cost of service activity generated by a call. A call quote outlines the labor, expenses, and replacement items required for service or repair work.

Call management uses queues to categorize calls and assign them to service personnel. In some cases, the system forwards calls if you do not close them within a certain time. This forwarding is call escalation.

Call escalation tries to ensure that you resolve calls within defined rules. If a call is not solved, the system escalates it to a more visible queue, often managed by more highly skilled service personnel.

Each service organization must set up these queues based on business requirements. Once a queue structure is established, decide if you need call escalation. If you do, carefully plan the call escalation sequence.

Once you establish queues and escalation sequences, most service organizations need a controlled method for assigning service personnel to calls. SSM provides powerful engineer scheduling based on a point system. Your criteria for assigning points is used to recommend engineers to assign to calls.

Tracking service inventory can pose special problems. You may manufacture some items used in service and already track them in inventory. Others you may need to set up.

Service inventory can be complex, including everything from tool kits to replacement parts to consumable items such as inks, fillers, reactants, and lubricants. Storing service inventory in multiple diverse locations—such as mobile field units, repair centers, service supply depots, workshops for refurbishing items—adds complexity. You also need to track items you return to your suppliers.

SSM has mechanisms for tracking and managing these situations. They are woven into the call activity recording, material orders, return material authorization (RMA), and return to supplier (RTS) functions.

Some equipment requires a technical professional to complete the installation. This need is addressed by an interface between sales orders and service. You can generate an automatic installation call when an item requiring installation service is sold.

While most service activity is in response to a breakdown, a company can try to prevent failure by offering preventive maintenance. Preventive maintenance is servicing an item at regular intervals before it breaks down, in the hope of preventing failure.

In industries such as aerospace manufacturing, preventive maintenance is an obvious necessity. In other industries, such as copiers, preventive maintenance has become standard. Preventive maintenance requires prescheduling preventive maintenance calls and supplying the personnel and inventory necessary. SSM fully supports preventive maintenance.

Many service and support organizations have to process returned items. This requires a series of business decisions: Do you immediately ship back a new item and refurbish the return? How do you use the refurbished return? Do you refurbish the return and then ship it back? Do you offer loaner items while the returned item is repaired? Do you choose not to refurbish and ship back only new items? Do you ship a replacement item to your customer before the return is shipped to you? These decisions depend on your products and how critical they are to your customer.

SSM offers service request capabilities. Service requests report service experience to the rest of an organization. Typically, service requests record engineering changes and other suggestions from the customer base and from the service organization.

Service experience is then used for product improvement, process improvement, marketing adjustments, and strategic product decisions. In this way, service and support provide both revenue and valuable product experience.