3 Reasons to Add Servitization in Manufacturing
Servitization in manufacturing is in not a new phenomenon. Just think about Xerox selling copiers and servicing them. But what is new in this “Age of Servitization” in manufacturing is how you can execute servitization using new technologies. Adding a service component can create exponential returns when done right. Successful servitization depends on the right overall customer-driven strategy, properly preparing your team and using the right digital tools.
One of the largest returns on adding servitization in your manufacturing operations is to build another stream of revenue. According to Barclay’s Annual Manufacturing Report, 83% of servitized manufacturers said they added a service component to sell more products. Our spotlight item outlines how servitization in manufacturing contributes to increasing your company’s revenue and how to do that with modern, cutting edge technologies.
1 Stabilize ups and down in revenue when product demand is cyclical
The nature of some products and equipment is that demand tends to be cyclical. Sales may go up or down depending on the season. Or, if the economy is in a recession or an upswing. Sales in some industries may run inverse to a recession or an economic recovery. Servitization in manufacturing continues to generate revenue when sales are slower, stabilizing a company’s income. Maximize sales regardless of the season by using Big Data captured by an ERP and CRM (in our case, Dynamics 365, which can do both) to capture data. With visual reporting in Power BI, you can analyze your historic data based on your customer’s behavior to create your service strategy during slow times.
Moreover, servitization has been shown to reduce costs and make your production. Of businesses who have added service to their manufacturing operations, 31% said it reduced the overall cost of production and 22% said it increased flexibility of production.
2 You keep your company in your customer’s top of mind
A manufacturer who services the customer’s product maintains the customer relationship even after purchase. A manufacturer who does not offer continuing service ends their customer interaction once the sale is finalized, decreasing the opportunity of building customer loyalty to the manufacturing brand. Leveraging our drag and drop Graphical Planning and Scheduling tool, the back office can coordinate technicians, making service scheduling as efficient as possible. Mobility solutions give service workers instant access to customer information, equipment schematics and service agreements. Having all of this information at their fingertips reduces the time the customer has to wait for your technician to arrive and gets their equipment fixed the first time, making your customers delighted with your service.
Including a service model, in addition to production, shows the customer your company is committed to the customer’s experience. Nurturing that relationship by offering services keeps your company in the forefront in your customer’s mind when it comes time for them to replace their product or equipment.
3 Open up multiple opportunities to innovate
Neglecting to servitize is neglecting to differentiate yourself, which leaves you vulnerable to being left behind in your industry. Innovation is the approach that every business needs to take in an ever-changing market. Innovating through improving your product is one avenue to pull ahead of the pack in your market. Establishing and innovating through a service practice is yet another way to differentiate your business among your customers.
With IoT connected in your equipment that you sell and service, you can monitor the health of your products and prevent equipment failures. You can also use that IoT telemetry to inform your strategy and design team on ways to innovate your products in a way that better serves your customers.
How to get started
Among businesses who have not adopted servitization in their manufacturing operations, 39% said a lack of understanding constituted a barrier that was preventing them from servitizing their products or at least was delaying it, and 30% said that inadequate IT was a barrier. The first step to undertake is to explore ways to integrate service offerings into your business model by evaluating product-oriented, use-oriented, or results-oriented offerings. Only after having determined the scope of possible offerings, one can start obtaining information on ways to support the servitization processes within your ERP or CRM system.