Home' MHD Supply Chain Solutions : MHD May-Jun 2017 Contents Prediction 3.
75% of mid-sized manufacturers will adopt
'servitisation' before 2018.
It's not easy being a manufacturer. The price
of manufactured goods in the West has been
falling for decades. The Producer Price Index
for major European countries or US states all
show the same trend: from 2015-2016, the
price of manufactured goods in the UK fell
0.7%, 1.4% in Finland and 0.29% in Germany.
In some years prices may creep up, but the
big picture is clear: in ten years’ time, western
manufacturers will no longer be able to compete
on price. The days of 'make it and sell it' as a
default business model are over. So how else
can manufacturers compete?
Jargon aside, 'servitisation' is, quite simply,
understanding the bottom line of what your
customers really want. Take Xerox. After
decades of producing ever more sophisticated
photocopiers, in 2000 they asked themselves:
“What is it our customers really want?
on demand – whenever, however?” Managed
Print Services was born. By 2013, Xerox had
transformed from product-centric to service-
centric. The results for Xerox customers were
broad and positive: Reuters achieved a 19%
cut in its total cost of ownership, Sandwell
Council a 30% cut in printing costs, PwC
met 100% of its security needs, and the UK's
Department of Work and Pensions had a 36%
cut in electricity consum ption. For Xerox,
too, the rewards were significant: a sharper
competitive edge, more predictable revenue
streams and a portfolio of customers who are
in it for the long haul.
Beijer Electronics is another great example.
A global innovator in industrial automation and
data, Beijer makes smart black-box systems that
optimise input/output devices. With copies of
their technology appearing at ever cheaper prices
and hardware sales predicted to decline, Beijer
needed to be both proactive and innovative.
The company servitised, launching the
online WARP Engineering Studio. With WARP,
customers can integrate, customise and better
control how they use Beijer’s products. WARP
provides premium services customers can
operate on top of their black boxes – and
speed up their processes. For Beijer, selling
products as a service through WARP means
customers will want, or need, to compare them
on product and not price. The capabilities the
Studio delivers are what the customer value.
Servitisation gives Beijer a highly strategic
competitive edge. It lets them monetise their vast
in-house expertise, harnessing it to make sure
that their customers get what they really want.
And now for the ‘how’
How can manufacturers start building their
services? Step one: start small. Are you offering
customers spare parts and consumables that
add value to their purchase?
Step two: what maintenance services do you
offer customers? Built-in maintenance de-risks
a customer's purchase. Service contracts that
guarantee, for example, 99% uptime, can be
optimised through live IoT feeds, where you the
supplier schedules preventative maintenance that
lets the customer focus
on their core business.
Step three is all
about sharing risk –
and revenues. Selling
than just equipment.
Customers pay a
monthly fee for a
a solid, predictable
independent of falling product prices.
The journey isn't easy, sales cycles can be
longer, new service departments may need to
be created, revenue gaps can occur before
services mature. But when manufacturers move
beyond the factory walls and ask themselves
what it is their customers really need from
their products, new relationships, growth and
opportunity can flourish.
Antony Bourne is the global industry director
of industrial and high-tech manufacturing for
enterprise applications company IFS. Antony
has over 20 years’ experience in the IT and
manufacturing industries. Prior to joining IFS
in 1997, he held business analyst positions
with Ford Motor Company and AlliedSignal,
where he implemented ERP applications as
well as business process improvements.
some... but for
others, it can be a
MHD SUPPLY CHAIN SOLUTIONS — MAY / JUNE 2017
IT IN THE SUPPLY CHAIN
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