Collecting insights from academics, customers, and industry leaders, Syncron recently set out to understand how manufacturers can capitalize on the megatrend of servitization, where manufacturers shift from selling a product itself to the outcome or value that the product delivers.
It has become clear that 2019 is a pivotal year for manufacturers, one in which they must implement new strategies and processes to position themselves for success for years to come. Most notably, maximized product uptime, and a fully optimized service supply chain, were key factors in progressing on this journey to servitization.
In a highly seasonal business with a wide range of challenges, including fluctuations in new orders, legislative restrictions, commodity prices, and weather, it’s time to make after-sales service a priority and competitive differentiator.
For agricultural equipment manufacturers in particular, we identified three key trends to look out for in the year ahead. These trends — as well as some proactive steps companies can take today — will set up companies for success in 2019 and beyond.
1. Optimize current processes to lay the foundation for servitization success
Agricultural equipment continues to become smarter and technology is now more advanced than ever, influencing manufacturers to evolve the development and manufacturing of their products to meet these changes.
Recently, farmers in Nebraska started hacking their own equipment with firmware developed in Eastern Europe and available on invite-only, paid online forums — all to repair their own equipment and avoid long wait times to see a service technician or traveling hundreds of miles to the nearest dealer to have their equipment repaired.
Consumers may no longer need to leverage the black market to make repairs, however. In October, the Library of Congress and U.S. Copyright Office proposed new rules “that will give consumers and independent repair experts wide latitude to legally hack embedded software on their devices in order to repair or maintain them.” The exemption applies to “smartphones, tractors, cars, smart home appliances, and many other devices.”
It’s clear that we are in the midst of a drastic change within the heavy equipment industry, one that is forcing manufacturers to redefine the way they do business. In 2019, manufacturers must reevaluate their service parts inventory management processes and operations. Identify any inefficiencies and determine how current service parts management processes are impacting customer loyalty. Original equipment manufacturers (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.
2. Create a servitization taskforce
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. As a result, manufacturers should establish internal teams and leaders to ensure that the changes the business implements are successful.
In the coming months, agricultural equipment manufacturers should identify key leaders in various functions that will touch any aspect of servitization. Organizations like research and development, production, service, finance and sales, among others, all have a vested interest in making the shift to servitization a reality. Consider establishing something like a “servitization council” that regularly meets and can facilitate educating the broader organization on the importance of the changes servitization requires.
3. Establish milestones to measure progress and encourage accountability
Change can be scary for anyone, especially when it involves completely redefining the way a large OEM has operated for decades. To mitigate some of the fears and risks that come with change, manufacturers should build the structure that will help internal teams measure their progress.
Because the full shift to servitization will take years, define specific milestones, like where the organization expects to be one, two and three years from now (or whatever timeline is best for each organization’s needs and goals). This will help leaders create more tactical, department-level measurements and identify the necessary resources, technology and infrastructure needed to succeed. Finally, establish regular updates and check-ins to ensure each functional area meets its desired goals.
In this era of servitization, the responsibility for ensuring maximized product uptime is shifting from the end-user to the manufacturer. It requires manufacturers to find ways to increase cost efficiencies throughout the entire value chain, ultimately driving them to completely transform business logic, company cultures and product development strategies. Today’s global manufacturers are at a pivotal moment in their storied histories, and those that adapt to the changing climate in 2019 will be the ones to come out on top.