Can you have your cake and eat it too? When it comes to combining a high level of customer service with a lean and efficient supply chain, few companies can match Saturn Corporation’s after-sales service business. Saturn’s success in that area is a wake-up call; its approach should serve as a model for any industry trying to forge the critical link between after-sales service and customer loyalty.
What Saturn has done is adopt and continuously refine the concept of jointly managed inventory, a variant of vendor-managed inventory that involves sharing inventory risks with “retailers” — the name Saturn gives its dealers. In doing so, it has uncovered a precept with broad implications: Companies that match their parts-supply strategy to the criticality of the customer’s need for the part can dramatically improve customer satisfaction in after-sales interactions.
Saturn’s success in after-sales service has been well documented by industry watch-dogs. Although its retailers’ service-parts inventory turns over more than seven times a year, far exceeding major competitors’ turnover, its retailers excel in off-the-shelf availability.
Saturn Is Best at Parts Availability…
…and Wins Customer Loyalty for Repair Services
Such efficiency leads to both higher retailer profitability and satisfied, loyal customers. The spring 1999 survey from J.D. Power and Associates reported Saturn customers’ high satisfaction with the availability of parts to support after-sales service — and the low incidence of out-of-stock parts resulting in the car not being repaired right the first time. Indeed, Saturn consistently ranks among the top 10 brands of automobile manufacturers for supply-chain service, comparing favorably with luxury automobiles such as Lexus, Infiniti and Acura.
Unsurprisingly, customers of Saturn return for repairs and scheduled maintenance for many more years than purchasers of other automobiles. As managers know, high levels of brand loyalty result in high levels of repeat purchases.
How did Saturn manage to achieve its impressive performance in after-sales service? Its secret is twofold.
1. J. Ball, “Cutting In,” Wall Street Journal, May 10, 2000, p. 1.
2. M.A. Cohen and V. Agrawal, “After Sales Service Supply Chains: A Benchmark Update of the North American Computer Industry,” project report (Philadelphia: Fishman-Davidson Center for Service and Operations Management, the Wharton School, University of Pennsylvania, August 1999).