The Impact of the European Union on Service Operations

By Larry Laux
President and Founder

At the beginning of the year I was planning on making more blog entries than I have by February. However, things do sometimes get in the way of my bloging – as was the case with my recent business travels to Europe. One of the ideas that I bring back is: The implementation of the European Union (EU) has many significant impacts, mostly positive, on service operations. Two of these are the common currency (Euro) and the relaxation, to the point of elimination, of border/customs issues when transferring parts between offices in the EU.

Metrix customers have educated me, and us, on multi-country service operations. (Remind me sometime to tell you my true story of how the Italian country manager explained the competition’s success against his operation.) Anyway, the countries in Europe operate in a fairly close analogy to regions in the U.S.

Many U.S. organizations divide the U.S. into 4 to 8 regions, depending on the density of their installed base and other operational and logistical issues. Each region (some call them territories, or areas) usually has a manager who is responsible for the service activities, personnel and spares in their ‘turf’. National (or global) service contracts can be a challenging issue that can be discussed in another blog entry.

A common scenario relates to spare parts – a customer in the Southwest region needs a certain part, there are none in the region, but the Midwest region has one. In the past there often would be ‘horse-trading’ as regional managers protected their stock, but more recently inter-region demand is more automated. Of course, as managers’ performance metrics often contain an inventory turns yardstick, proper accounting of the transfer and sale is required.

In Europe, in the past, things were more complicated. The value of the part would need to be converted from, say, Deutschmarks to Francs. This would be especially tricky if the part was sourced not from corporate, but directly by the country manager. Further, the customs drag made it more difficult to move the part from here to there in hours, as today’s SLAs often require.

Both of those issues go away with the EU.

Several other effects are seen as a result. Some organizations have been able to lower overall inventory levels, as they don’t need to ‘keep one of everything in every country’. Also, the need for a service manager in each country has lessened. Some organizations are consolidating into logical service regions in Europe, less constrained by the borders of the countries.

I would not say that they are becoming the United States of Europe. Still, it’s fun to see the changes in the industry and how quickly organizations adapt.

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15 Feb. update - I forgot to mention another interesting issue, not directly relating to the EU. You may know that GPS and vehicle tracking is getting quite some attention in the U.S. But in Germany, I understand that some laws dating from post-WWII prohibit tracking individuals. Do any of you know if that is the case currently, have those laws been changed or is GPS for service people not an option in Germany?