What does a stockout cost an in-house service department?
The customer cannot go anywhere else and has to wait.
Where you lose money
Downtime at the customer. Their machine stands still until your part arrives.
Waiting technicians. A service call without the right part means lost hours or an extra service call.
SLA penalties. Contractual availability guarantees get hit.
Relationship damage. The next machine or the maintenance contract is bought elsewhere.
Plus everything from manufacturing. A machine builder is itself a manufacturer; those impacts apply too.
How do you calculate it?
- Internal staff time = team size (FTE) × % of time on part shortages × labour cost per FTE
- Downtime at your customers = active machine base × downtime hours per machine per year from missing parts × cost per downtime hour
- Total impact = internal staff time + downtime at your customers
Explanation
For unique parts your customer has only one place to turn: you. As long as the part is not there, their machine stands still. Their production drops out, their crews wait and their deadlines slip. Your customer pays that cost, and lays the blame with you: their machine stood still because your part was missing, and sooner or later you carry the consequences as the supplier. That is why you work out that cost across your whole active machine fleet. Every service call without the right part also means lost technician hours or a second trip, and in the office there is more work on top: handling customers, finding alternatives, pushing purchase orders.
Availability percentages mislead here too. The parts that are requested most often are missing most often, and one missing part makes a whole service call worthless: the technician is there, the machine stays down. So measure your part availability per service call: what share of calls could be completed in one go with everything on board.
A machine builder is moreover a manufacturer itself: for shortages in its own production the manufacturing calculation applies, on top of this one.
Relationship damage is not in the formula: the customer who waited too long for parts may buy the next machine or the maintenance contract elsewhere. The estimate is therefore a lower bound on the real cost.
Curious what this costs you?
A short conversation, then a personalised calculation for your situation.