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04 Feb 2016

Is the Future of Manufacturing Dependent on Servitization?

Is the Future of Manufacturing Dependent on Servitization?

For manufacturers, it is no longer enough just to make products. There is a new trend; Servitization, where manufacturers must also provide advanced service contracts to accompany their products. 

Customer service is key to any business’s success. This service does not end at helping the customer through the design and production of a product, but also continues on past the purchase of the product to long-term care plans. Rolls-Royce for example, offers a “TotalCare” package.  Within this Rolls-Royce takes responsibility for most aspects of engine maintenance.  The customer pays a rate per engine flight hour, providing a major incentive for Rolls-Royce to make their engines as reliable as possible.

Servitization goes beyond providing a product and a service, to understanding the customer and the customer’s business needs. It is about how your product and service can help the customer to become more successful, as with Rolls-Royce’s reliable engines, enabling customers to operate more efficiently without worry about engine maintenance and failure.

These services can involve a range of approaches, such as predictive analytics to predict specific failures, consumption monitoring to create customer-specific servicing, remote communications to adjust/fix products and remote access the ERP system for maintenance techniques and product details.

Servitization is not merely about business model innovation. It is about transformation, whether it relates to the corporate culture and management approach, or the organizational structure and business process.

 Product Testing

There are significant benefits and opportunities in servitization for manufacturers, which can be divided into three main areas:

1. Response to Customer Demand

With more and more complex customer and market demands, product innovation is no longer enough. Customers are looking for more. By providing services to accompany your products, you can better meet their expectations.

2. Financial Sustainability & Operational Scalability

Because service contracts tend to be long-term, they can deliver financial sustainability and operational scalability.

3. Secure Revenue Streams

Another benefit of long-term service contracts is that they provide a sense of security for the manufacturer, providing guaranteed revenue. The valuable data gathered through the customer’s use of the product, also lowers the cost of product innovation.

By embracing servitization, manufacturers can maintain their competitive advantage, especially in the face of rising pressures from globalisation, while at the same time improving value for customers.

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