Leveraging Captive Spare Parts to Boost Operating Profit

One area in specific holds great potential for companies within industrial sectors: spare parts.

Our experience suggests that although spare parts often represent only 10 percent of global turnover they can contribute up to 50 percent of net income in an average industrial or automotive company.

The largest area for value creation lies specifically in captive spare parts—those that either have no competitor or have a dominant market share. These component pieces are often priced “sight unseen.” Price levels are decided based on cost alone or with some mark-up percentage applied universally to all parts in a technical family. The end result: captive spare parts are not valued in line with customer perceptions. Some are underpriced and erode margins; others are over-priced and damage the credibility of a given brand.

Accenture’s approach takes the guess work out of captive spare parts pricing. We combine consulting expertise with industrialized processes and assets that enable the systematic optimization of the price of thousands of spare parts that flow through our clients’ network each month. For companies that manage this volume of units, the end boost in operating profit and brand image can be significant.