The heavy trucking industry is booming and there isn’t a slowdown in sight. The number of in-service Class 8 trucks (U.S.) is expected to hover around 3.76 million between 2019-2023 and reach 4.07 million by 2024-2028.
This high level of demand is forcing manufacturers to reshape the way they serve their customers. Now more than ever, the industry is seeing a shift to servitization and OEMs (original equipment manufacturers) are adapting and evolving to meet these new demands.
But, what does this shift mean for the industry as a whole and the manufacturers that serve it?
What is servitization and how does it impact the heavy trucking industry?
Servitization is where organizations transition from selling one-off products to selling the outcome or value those products deliver. Brands like Netflix and Spotify – where a user pays for access to multiple shows, movies or music – have created an on-demand mindset where customers expect products to ‘just work’ and service to be instantaneous. This mindset is trickling into all facets of business and life and is completely redefining the way people consume products.
This mindset has trickled into all industries, including heavy trucking. For this industry in particular, many of the big brands are moving to a business model that centers on maximized product uptime, or preemptively repairing equipment before it ever breaks down. “Uptime” has been a buzzword in the heavy trucking industry for quite some time and right now, that means OEMS are very focused on putting new trucks on the road and keeping them there, oftentimes with a minimum of a 24-hour repair window if a truck breaks down.
In the servitization-centered economy of the future, however, manufacturers must eliminate any unplanned downtime completely, and find ways to increase cost efficiencies throughout the entire value chain. This will force these leading brands to completely transform business logic, company cultures and product development strategies.
What makes this the right time for manufacturers to change the after-sales service side of their businesses?
For heavy trucking manufacturers, keeping commercial vehicles on the road – hauling freight and making money – is one of the single most important requirements in the minds of truck owners and fleet managers going forward. And if the customer is demanding this change, manufacturers essentially have no choice but to adapt or lose significant market share to those manufacturers who adapt before them. As more OEMs move to a service model focused on maximized product uptime, they will transition away from the traditional, reactive break-fix method of service into one that is much more focused on preemptive maintenance.
What will truck manufacturers have to do to be successful at servitization?
The full shift to servitization could take anywhere from five to 15 years. The realization of a servitization-centered economy is a marathon, not a sprint, and it’s here to stay. Because this shift impacts nearly all facets of an organization, we recommend three steps: 1) Analyze and optimize current processes to lay the foundation for servitization success. 2) Create a servitization task force. 3) Establish milestones to measure progress and encourage accountability. While this simplifies a massive corporate overhaul, it does provide the guidelines and structure OEMs will need to meet the new demands servitization brings.
How do truck dealers, parts distributors and independent repair garages fit into this new model?
Dealers, part distributors and independent repair shops will be an integral part in the shift to servitization. The OEM will need to have a tighter relationship than ever with their dealers and distributors, especially. They will need to work together to identify any inefficiencies and determine how current service parts management processes are impacting customer loyalty. OEMs should also consider evaluating their service parts pricing processes – are pricing processes mature or basic? Could a value-based solution uncover additional profits? Finally, manufacturers should reexamine vendor relationships, ensuring their after-sales service solution providers are meeting (and exceeding) expectations and ultimately adding real value to the organization.
How will these changes affect fleets?
Fleet managers are demanding maximized product uptime and will not buy new trucks from an OEM that does not provide it. Subsequently, servitization could completely redefine the way fleets are managed. Fleet managers already keep a close eye on vehicle uptime, maintenance patterns and more. In this new model, however, instead of taking a truck out of service once it has already broken down, fleet managers will be able to preemptively repair the vehicle prior to its failure – ultimately allowing for maximum fleet utilization and driving increased revenue and business performance for the fleet. OEMs will need to work closely with fleet managers to ensure they have the appropriate parts and resources on-site to repair trucks when necessary.
If OEMs take on more of the responsibility for vehicle uptime through servitization, what will be the impact on new vehicle prices?
New vehicle prices could potentially become obsolete. While that’s a bold statement, by the time servitization is fully realized, there is a strong possibility that OEMs will be selling subscription plans where customers pay for access to trucks opposed to the trucks themselves. This will flip the pricing function on its head and is why manufacturers should identify key leaders in various functions that will touch any aspect of servitization. Functions like research and development, production, service, finance and sales, among others, all have a vested interest in making the shift to servitization a reality. Establishing something like a ‘servitization council’ that regularly meets and can facilitate educating the broader organization on the importance of the changes servitization requires is key.
Download our new Orange Paper to learn more about what these thought leaders predict will be major manufacturing trends in 2019 and beyond, and what resources and technologies will be needed to win.