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The servitization of manufacturing

March 6, 2020
Take the proper steps before implementing a service-centric business model to ensure success.

The line between products and services is blurring, and in some cases, disappearing entirely. Many forward-thinking manufacturers are reinventing their business models and embracing servitization to give them a competitive advantage. But if you don’t have the right software and technology in place, your aftermarket services initiative won’t be a success.

For example, our resident technology expert, Sheila Kennedy, CMRP, found that companies offering annual aftermarket service contracts are 24% more likely to report profitability than those doing reactive field service work, according to a May 2018 study from IFS. More than 41% of Digital Transformation Leaders have implemented software to manage contracts and warranties, as opposed to less than 12% of laggards. Analytics was the most popular area for planned expenditures.

Kennedy also found that inadequate software also is a challenge. A January 2018 IFS primary research study found that legacy software solutions used by specialty and trade contractors could prevent them from profitably delivering aftermarket services to their customers. Of the 85% of study respondents who said they have maintenance contracts, only 14% said their software facilitated these contracts "very well." For example, most respondents lack the ability to perform key functions on touchscreen devices.

Driving growth in aftermarket services

“Compared to the time when cars had carburetors and no computers, few people repair their autos anymore – me included,” observes Ralph Rio, vice president at ARC Advisory Group. “As products become more complex, they become increasingly impractical for a general-purpose maintenance team at the end customer’s site to support and maintain. This usually becomes apparent when a repair is needed and it requires product training.”

The challenge with training an on-site technician is that the knowledge may decay or the technician may leave for another role before the skill is needed, Rio notes. As a result, users look to the supplier for support, and services have become an inseparable component of the product.

At your service: What expanding services offerings looks like for four industry-focused organizations

The latest mobility solutions, bolstered by artificial intelligence, augmented reality, 3D modeling, and the internet of things (IoT), are turning field service management (FSM) into an art form. They are upgrading how practitioners communicate, make decisions, and achieve reliability, efficiency, asset longevity, and customer satisfaction objectives. They are also enabling new business models.

Field service management's moment in the spotlight

How Your CMMS Can Drive Growth in Aftermarket Services

The lucrative potential of aftermarket services has product manufacturers formulating new service offerings and service contractors stepping up their game. Some are doing better than others, and it often depends on the tools used. Is your EAM/CMMS helping or holding you back? Read this special report to learn how your CMMS can drive growth in aftermarket services.

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