The Subscription Model & What it Means for Manufacturing

Car commercials have long been a mainstay in our media consumption. Yet, lately there has been a new type of car ad cropping up that looks a little different than the ads to which we’ve grown accustomed. These new ads promise monthly subscriptions opposed to attractive ownership or lease options.

Volvo, Porsche and other popular automakers have all begun investing in a new method of business that focuses on access rather than ownership. Through these new subscriptions, consumers can access a car for a monthly rate that also includes maintenance and insurance. Traditional leasing options, however, limit the consumer to one vehicle for a finite period of time and put the responsibility of maintenance and insurance on the driver.

This is a massive shift for automakers today. And it’s proving successful, particularly among younger audiences – obviously the subscription model isn’t going anywhere anytime soon. But what does this mean for auto manufacturers and the electronics parts they buy? Moreover, if this model continues its rise in the auto sector, will it migrate into other manufacturing verticals?

Manufacturers can get ready, no matter the industry and vertical they serve, to successfully meet the demands of this new business model. They just need to follow a handful of best practices.

Focus on maximized product uptime

With maintenance covered under the terms of subscription, auto manufacturers are placing the onus on themselves to keep their vehicles up and running, all the time. This means that an operational shift from a reactive, break-fix service model to one that guarantees maximized product uptime is especially important.

To achieve this, business mindsets and goals must change. Auto manufacturers must invest in next-level technology – equipping cars with sensored parts and incorporating IoT into their everyday practices – to ensure that they’re tracking vehicle performance and notifying consumers that maintenance is required. This is a drastic shift from the current ecosystem where the consumer is in charge of keeping their vehicle on the road, and manufacturers must be prepared to meet these new demands.

Optimize the service supply chain

With more focus on maximized product uptime, manufacturers’ ability to succeed is only as good as their service supply chain operations. Too often today, consumers leave dealerships unhappy because a part is out of stock or is not competitively priced.

With the subscription-based model becoming common, it’s more important than ever to optimize the service supply chain, ensuring parts are in the right place, at the right time and sold at the right price. If a dealer does not have a critical part in stock, a subscriber could be left unable to use the car they paid for – ultimately leading to a negative brand experience.

A mismanaged service supply chain could threaten the solvency of the entire subscription business, given how nascent it is at this stage. If customers doubt the reliability and prompt servicing of subscription vehicles, this promising business vertical may never reach its full potential.

Make data actionable
As cars become ‘smarter’ with more sensor-equipped parts, manufacturers must use the massive amounts of data they are collecting to improve the customer experience – especially the experience of their subscribers. To maximize product uptime and ensure vehicles are always up and running, automakers must invest in the right technologies to truly make data actionable.

The backbone of all efforts to optimize the service supply chain is big data. Gathering, analyzing and using data provides manufacturers with previously unimaginable advantages – giving them the tools they need to reduce excess spend, maintain vehicle performance, meet increased demand and so much more. With the help of IoT, manufacturers can predict the future, target individual consumers and scale rapidly.

The vehicle subscription model is one of the most disruptive developments to ever hit the automotive sector and could expand into other industries. As it continues to grow, manufacturers must optimize their service organizations to ensure customer expectations are always met.