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Why servitisation is crucial for manufacturing

18 January, 2018
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Why servitisation is crucial for manufacturing

In the UK, back in 2013, research from the Advanced Institute of Management Research reported that 40% of manufacturing companies are thought to be servitised. Now with the rise of industry 4.0, manufacturers have significantly more opportunities to focus on delivering and improving customer experience.

Using new technologies such as IoT, manufacturers can gain significant insights into how their factory is working ensuring they are providing their customers the best possible outcome.

 

Why is it then that many manufactures are not implementing servitisation?

 

The 2016 Annual Manufacturing Report highlighted that 70% of manufacturers are not implementing servitisation due to a lack of resources. Further noted is that 74% want to develop closer customer relationships and 47% want to increase productivity through the expansion of services. To take full advantage of industry 4.0 and reap the benefits it can bring in terms of servitisation, organisations must begin to change or they risk being left behind.

 

The benefits of servitisation

 

Onwards and upwards

 

Being able to adapt to customer needs inevitably leads to increased customer loyalty. The knock-on effect of loyal customers is increased revenue. Research shows that companies who have improved engagement are able to drive up-sell revenue from 13% to 51% whilst also increasing cross-sell by 22%. A large reason for this is due to word-of-mouth, customers are sharing their opinions with their peers and because we are living in digital times it is easier to voice one’s opinions; the 2016 B2B Buyer’s Survey found that 62% of B2B buyers were relying more on peer recommendations than the year before.  

 

As technology is the main driver for change with servitisation, manufacturers are also able to lower costs significantly. The 2016 Global Industry 4.0 Survey conducted by Pwc reported that due to digitalisation, over the next five years costs will be reduced by 3.6% per annum.

 

New revenue streams

 

Manufacturers are able to achieve new revenue streams by adopting service models. A recent survey revealed that 41% of manufacturing companies have implemented service business models. From this, 70% reported benefits such as achieving higher margins and creating new revenue stream. Tim Baines, a professor at Aston Business School, measured £6 million in growth added value from a collective of SMEs who have adopted servitisation. Offering additional services adds to your bottom line and leads to a happy customer.   

 

Differentiation

 

As processes innovate and services improve, it becomes increasingly difficult for competitors to emulate what you do. By developing closer relationships with customers, manufacturers gain a better understanding of requirements and can react to necessary changes in quick time. Not only this, but with the use of modern technology manufacturers can also anticipate requirements saving vast amounts of time.

 

Other trends to watch out for in 2018

 

Digital transformation will continue to disrupt manufacturing processes in 2018. We have identified four trends that manufacturers should invest in to ensure success in 2018. Read our blog post to see our top picks.

 

The discrete manufacturing series

Our series focuses on five common problems discrete manufacturers are currently facing, and how to solve them, including case study examples of where discrete manufacturers have implemented our solutions and seen success. The full series includes tip sheets – available for download - on:

How manufacturers can build additional revenue streams

How manufacturers can improve time-to-market

How to successfully manage multi-mode manufacturing

How manufacturers can maximise the use of assets

How manufacturers can manage compliance effectively