Businesses across all sectors and industries are keen to comprehend what digital transformation means to them and how and why they should be leveraging cutting-edge technologies. Syncron interviewed service experts to identify major trends in 2018 and beyond, and gain their perspective on how manufacturers can transform their service businesses to improve the overall financial performance of their companies.
Customers’ rising after-sales service expectations, along with increased competition for new product sales, are driving manufacturers to move beyond the status quo and embark on journeys to transform their after-sales service functions to maximise product uptime. Leading companies are accelerating these service transformations, as parts and service contributes upwards of 15 percent of total revenue (McKinsey & Company) and averages a gross margin of 39 percent (Bain and Co.).
Key industry influencers from Carlisle & Co., The Service Council and Siemens Gamesa, among others contributed to produce the paper: “2018 After-sales Service Predictions: Strategies for Empowering Manufacturers to Deliver Game-Changing Value”. Here are the key predictions for 2018 highlighted:
- After-sales service will serve as a significant revenue and profit lever. After-sales service is becoming an increasingly important and strategic focus area for manufacturers around the world. There is more interest in the space than ever, as senior executives understand the value that exceptional service experiences can bring to a company’s financial performance.
- Service is shifting from a transactional, break-fix model to a subscription-based model focused on maximising product uptime. More customers than ever are requiring service level agreements (SLAs), which often guarantee product uptime – or proactively repairing equipment before it fails. It’s becoming more important than ever to ensure downtime is minimised (or preferably eliminated) to maximise the lifetime value of a customer – leading to improved financial performance.
- Successfully implementing emerging technologies and sophisticated data management are necessary for success. With a focus on product uptime as the key to manufacturers’ financial success, artificial intelligence (AI), machine learning, IoT, predictive analytics and other emerging technologies are playing an increasingly larger role in after-sales service and the broader supply chain. Proactive maintenance is the new profit lever for manufacturers and requires the integration of smart technologies.
- 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.
- 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. The online retail giant researched aftermarket parts in 2016, and by the close of 2017 is 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.