Increasing margin on after-market field service work

More manufacturers are focusing on after-market service as a way to add value to their offering, drive new revenue or replace flagging revenue from products.

By Christine LaVoi, senior client manager, IFS North America

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Manufacturers and distributors have found for years that margins on goods sold has been tightening as products become commoditized in a global market. Increasingly universal focus on product design (or unauthorized duplication) and greater consistency of initial quality mean it is harder to differentiate on these valued product characteristics.

More manufacturers are therefore focusing on after-market service as a way to add value to their offering, drive new revenue or replace flagging revenue from products.

According to a 2013 IDC study, North American equipment manufacturers need to maximize after-market service revenue because without it, only 9 percent were expecting increased revenues in coming years compared to 15 percent globally. Moreover, after-market service is less cyclical than new equipment sales, particularly for heavy equipment that may have a long lifecycle after the sale. This makes after-market service more recession-proof and less vulnerable to hiccups as sales of capital equipment or durable goods pushes from one quarter to the next.

In industries where your customers are, themselves, also working to increase margin or conserve operating revenue, more intelligent after-market service may be required because of customer price sensitivity. World-class field service management software may be the difference between being able to sell a service contract and execute against it profitably or letting customers run equipment to failure.

Field service management software, reverse logistics software, route and schedule optimization—all play a role in ensuring after-market service work can be performed profitably. Here are several factors manufacturing executives and others involved in after-market service should consider to ensure their enterprise systems will help them deliver service profitably.

Counterintuitive usability metrics

There is one main difference between many consumer computer applications in particular and software used to facilitate after-market service in the field.Consumer applications like websites and social media are designed to be sticky. That means they are designed to encourage users to spend time in the system. This may even be true for some enterprise-wide applications that are designed, using the principles of human-computer interaction, to encourage frequent use so as to maximize the amount of data captured by the enterprise system of record. In these situations, time spent using the system may increase in direct proportion to usability.

Applications used to facilitate after-market service in the field, however, are designed around process flows that limit the time a technician needs to spend interacting with the application. Even with little manual interaction with the application, the technician can still record the completion of work, request spare parts in inventory or seek guidance from remote subject matter experts when necessary. They may also be able to communicate with a customer with a simple tap on a wearable device as they depart for the job, so the customer knows they are coming, tapping again to let them know they have arrived.

A more advanced system may place geofencing in a GPS system so these communications are sent automatically as a technician leaves an office or dispatch center and as they arrive at a customer site. This reduces the amount of time technicians spend with the technology, which reduces cost. It also improves the customer experience, which increases perceived value and enhances the customer experience. These communications can also reduce cost of service provision by automating service level agreement (SLA) reporting. You will have a digital record of how quickly a technician was on site after a service request was made, or lacking formal SLAs, will be able to prove value to the customer using quantifiable data.

Knowledge capture, hiring and retention

A number of industrial sectors, including power generation, utilities, and other asset- and service-intensive industries, are seeing their skilled workforces nearing or cresting retirement age. They are scrambling to replace not only the headcount of their retiring workers but to retain the latent knowledge these individuals have accumulated. According to a 2015 study conducted by the Service Council, 46 percent of organizations said they had unfilled vacancies for field service technicians. Skilled workers retire or leave as an improving economy creates new opportunities. They take their years of experience and insight into troubleshooting, customer equipment and successful repair processes with them. That is one problem that can be detrimental to profitable delivery of after-market service.

Knowledge capture tools built into a field service software system will allow technicians to view tutorials or videos, either in a field or in a depot repair environment, to guide them through key processes or to solve challenging issues. This can increase first time fix rates and reduce time-on-site, which reduces cost of service provision while also ensuring customer satisfaction and SLA compliance. It can also be a force multiplier, taking the knowledge of your most skilled employees and extending it across more workers or even retaining knowledge of retired or departed workers.

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