Service Inventory: The Oxymoron Whose Time Has Arrived

Conventional wisdom contends that inventory is bad and that intangible services cannot be stockpiled. In fact, an entire branch of management science experts work tirelessly to wring inventory holding and transfer costs from global supply chains. With a growing portion of the US economy being service based, is it heresy to assert that services should be inventoried?

Sunil Chopra and Martin Lariviere, from Northwestern’s Kellogg School of Management, define service inventory as “the portion of work that has been performed and stored before the customer arrives or places an order”. The strategic application of ‘Service Inventory Principles’ can significantly improve the value of management sciences outputs, and enhance the results of pharmaceutical marketing and sales organizations. In this article, Service Inventory will be defined and characterized, benefits outlined, and future research pathways proposed.

Service Inventory can be characterized by the following:

  • Push-Pull boundary: defined by Chopra and Lariviere as “the point at which a supply chain switches from building to forecast to reacting to demand.”
  • Level and composition of resources
  • Access Policies

As a case example of Service Inventory, let’s examine the ‘differential resourcing’ sales model. Over the past 20 years the pharmaceutical sales model was characterized by multiple PCP teams, aligned in mirrored territories. This is a classic ‘push’ delivery model, where sales force sizing and alignments were created centrally, and pushed to the field. This process is costly, requires long lead times, and is inflexible, with brands and local markets compromising to the needs of the portfolio or ‘master brands.’

Differential resourcing moves the push-pull boundary closer to the field. By freezing the alignment configuration and altering the number / type of resources in a given geography, field managers could more rapidly adapt to local conditions. Rather than home office pushing a call plan, local changes ‘pull’ staffing and call planning activities on demand.

In addition, differential resourcing changes the resource requirements for field planning. It reduces the need for territory realignments, but increases the complexity and customization required for optimal call planning. Since a sales territory might be staffed with 1, 2, or 3 sales resources, optimal call plans for each scenario can be developed ahead of time, and put ‘on the shelf’. Importantly, the inventory acts as a ‘buffer’ that enables the use of automated processes and offshore resources to realize economies of scale and low cost delivery.

Finally, with differential resourcing, access policies change, as alignment and call plan refinement move much closer to the field. Through web-based portals, local managers can order and/or access inventoried services (e.g., call plan and quotas based on a given resource package).

Management sciences professionals can apply, these service inventory principles to enhance the value delivered to life sciences business challenges. Service Inventory has demonstrated many benefits, including:

  • Faster response time
  • Cost Reduction, enabled by:
  • Global resourcing (optimal mix of onshore / offshore)
  • Economies of scale
  • Enabling end-users to complete some of work
  • Improved customization and business flexibility
  • Enhanced quality
  • Empirical data from selected case studies and results / business case will be presented

This concept is applicable in following scenarios:

  • Call Plan “On the Shelf” – generating a call plan based on market events, rather than calendar, and placing the plan ‘on the shelf’ to be extracted by sales teams if/when triggers occur.
  • Dynamic Deployment – pushes the alignment and targeting refinement process directly to the field, thereby enabling the sales force to alter territory alignments, reporting relationships, create positions, exchange targets, and refine goals.
  • Customer Value Management -- dynamically updates customer lifetime value and optimal promotional plans to inform multiple promotional channels (emarketing, detailing, inside sales) at the point of customer interaction.

Additional applications could include:

  • Sales force strategy scenarios
  • Sample optimization: ‘stock to’ guidance via cloud computing
  • Digital asset management
  • eTraining
  • CRM and campaign planning / management
  • Customer Value Management – automated call center processing case

To learn more about improving the ROI of your analytics or to apply Service Inventory principles to your business please contact us at connect@axtria.com

About the Author:

Charlie Thompson is a principal at Axtria with more than 25 years of consulting experience in health care and financial services. Charlie brings in expertise in the development of technology and analytical intellectual property to find, win, keep and grow customers.

Tags: Inventory Management, Dynamic Resourcing, Buzzwords, Services

Charlie Thompson

Charlie has 25 years of experience in health care, financial services and management consulting. He has a blend of marketing, financial and operating experience, especially in the development of technology and analytical intellectual property to find, win, keep and grow profitable customers.