Shifts and developments in technology, demographics, healthcare, energy, politics and the economy over recent years are serving as a catalyst for massive transformation across industries, especially manufacturing. Customers’ rising expectations and increased competition for new product sales are driving manufacturers to embark on journeys to transform their after-sales service functions to maximise product uptime – ultimately delivering a superior customer experience and improved financial performance.
Below are five predictions for manufacturing in the year ahead, and tips and strategies to succeed:
1. After-sales service will serve as a significant revenue and profit lever. As senior executives understand the value that exceptional service experiences can bring to a company’s financial performance, after-sales service is becoming an increasingly important and strategic focus area for manufacturers around the world. Recent studies from multiple third-party research organisations support this clear opportunity: a report from Bain & Company suggests service averages a gross margin of 39 percent, which is much higher than margins on most new products (27 percent). The study also reveals manufacturing companies’ service business grew by nine percent annually, compared to a five percent growth rate captured on the product side of the business.
2. Service is shifting from a transactional, break-fix model to a subscription-based model focused on maximising product uptime. Customer expectations are changing, the manufacturing sector is consolidating and new sales of durable goods are fluctuating. Additionally, disruption from companies like Amazon, millennials in the workforce and new emerging technologies are creating a significant business opportunity for manufacturers, and it’s time for them to capitalise.
More customers than ever are requiring service level agreements (SLAs), which often guarantee product uptime. It’s becoming more important than ever to ensure downtime is minimised (or preferably eliminated). In this uptime world, there is much more emphasis on predictive maintenance – proactively repairing equipment before it fails. Service organisations should be aware of common failure points and identify strategies on how to best guarantee maximised product uptime and customer satisfaction.
3. Successfully implementing emerging technologies and sophisticated data management are necessary for success. Emerging technology is the biggest driver of what many are calling the Fourth Industrial Revolution, and manufacturers that adopt these new technologies will win the race to maximised product uptime. Artificial intelligence (AI), machine learning, IoT, predictive analytics, driverless vehicles, 3D printing and other emerging technologies are playing an increasingly larger role in after-sales service and the broader supply chain. Proactive maintenance requires the integration of smart technologies enabling remote performance and smart parts.
4. Amazon and other disruptors are forcing change. Major ecommerce players, specifically Amazon, are becoming very aggressive in the service parts space, and are doing so at a rapid pace. By the close of 2017 the online retail giant was already nearing 25 million part listings.
Manufacturers should get ahead of this trend as much as they can, and ensure they have sufficient service parts planning, execution and pricing capabilities in place to remain competitive. Manufacturers must adopt new business practices and invest in sophisticated cloud-based technologies that enable them to win against these large, well-known brands. Customers will pay for convenience, and brand loyalty is less of a factor than ever, so the manufacturers that succeed will make the necessary enhancements to compete.
5. The workforce and organisational structure for manufacturers is evolving. With the shift to a data-driven business model, the key to success in 2018 is to remember the human aspect of applying new technologies and business practices. The workforce and talent side of business is an attainable way for organisations to improve the strategic goals for 2018, bringing improved customer experiences and operational advancements. Businesses must consider the impact and influence of millennials – the most connected generation – in the workplace and as customers, as well putting strategies in place to keep knowledge from retiring out of their organisations.