Strategy for Creating a High Profit Aftermarket Service Business

By James B. Ayers
Principal
CGR Management Consultants, Los Angeles

This case describes a turnaround in the aftermarket parts business of Bombardier Transportation's Service business in Europe. The case took place in 2002-03. Since then, the company has created a line of value-adding services that are among the most profitable in the Bombardier. This case is based on a 2003 joint presentation by the responsible company executive and Jim Ayers. The presentation forum was the 2003 Supply-Chain World Conference in Atlanta.

Features of the turnaround environment included the following:

• An industry (rail transportation) in rapid transition due to privatization and consolidation.
• Previous fragmented industry resulted in waste and proliferation of country-centric rail equipment manufacturers and operating companies.
• Organization charged with fulfilling customer requirements for replacement parts was regionally structured with little focus on varied service needs of operating companies taking over national rail lines.
• Outsider (German speaking American from Dell) chartered with turnaround of the materials organization.

A team of managers within the organization oversaw the path to correction. The effort was coordinated through a number of facilitated planning sessions followed up with assigned task execution to implement the strategy.

The approach used a number of tools to assess the situation and devise a structuring to better meet the needs of customers.

• Four facilitated sessions to develop a direction and then follow its implementation.
• Self-assessment of processes using the SCOR model from the Supply-Chain Council.
• Self-assessment of organization, systems, and processes.
• Presentation by internal customers and sales representatives to provide the "voice of the customer."
• Definition of "businesses within the business," or "spheres, that focus on customer-product -operations combinations.
• Use of Porter's activity system model to constructed focused businesses with in the business.

The results have included the following:

• Turnaround in morale in the organization. People volunteering to transfer in.
• More attractive career paths for employees.
• New services for customers requiring close collaboration in their execution.
• About $40 million in new services business revenue.
• Sharpened focus on the most profitable part of the heavy equipment life cycle - the aftermarket.

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