Executive Briefings

After-Sales Service, Parts Management to Become More Important to Manufacturers' Profitability, Report Says

As manufacturers continue to competitively differentiate themselves within various industry settings, after-sales service will increasingly become more important in their overall business and profitability strategy, according to Business Strategy: Spare Parts Planning for Service Excellence, a report from IDC Manufacturing Insights. In fact, many discrete manufacturers can expect to capture upward of 30 percent of revenue from service and service-based product strategies.

After-Sales Service, Parts Management to Become More Important to Manufacturers' Profitability, Report Says

Highlights of the report include:

• Many manufacturers' service organizations still rely on spreadsheet, legacy or a modified in-house ERP system to plan the unique and very complex needs of service management and repair parts networks. Too often, investment decisions are delayed until service performance or inventory goals erode.

• Investment in service parts planning provides the critical foundation and nerve center for enabling predictive and prescriptive planning capabilities, optimizing parts inventory, and providing opportunities for broader leveraging of connected service platforms.

• When considering an investment in SPP technology, IDC Manufacturing Insights recommends that in addition to due diligence on industry-specific capabilities and customer references, manufacturers probe on a vendor's vision and investment plans for enabling more predictive service processes along with plans for leveraging 3rd Platform technologies.

• Technology selection teams must be well balanced with line-of-business, functional, and IT representation and should context a broader and deeper perspective in required SPP technology.

"In the coming years, manufacturers will continue to provide both competitive differentiation and higher margins by bundling or providing added services with products, including product-as-a-service business models where customers pay for product operational uptime and performance, over time," said Heather Ashton, research manager, Service Innovation and Connected Products, IDC Manufacturing Insights. "[We predict] that by 2020, onboard service revenue will outpace product-related revenue by a factor of two. Customers benefit from such service programs through optimized usage of equipment and products, higher productivity and decreased support costs."

The majority of manufacturers are just starting down the path toward service innovation. The goal of connected service platforms is to transform after-sales service from reactive- to predictive-focused processes. With the emphasis on predictive, the paradigm of the service supply chain shifts toward early warning mechanisms, maximized uptime, and needs for precise synchronization of service events. This includes onboard and self-communicating diagnostics, providing early warning to operating issues, more responsive networks of service parts, and service depot suppliers as well as highly networked maintenance facilities.

The research and consulting firm recommends technology selection teams garner a broader vision of connecting the process components that will foster service innovation. This would include stronger process and information linkages among product lifecycle management, service lifecycle management, and customer relationship management. A further consideration is the trend across multiple industry segments of fostering new and existing product innovation by incorporating more and more software and digitally based product components within physical products.

Source: IDC Manufacturing Insights

Highlights of the report include:

• Many manufacturers' service organizations still rely on spreadsheet, legacy or a modified in-house ERP system to plan the unique and very complex needs of service management and repair parts networks. Too often, investment decisions are delayed until service performance or inventory goals erode.

• Investment in service parts planning provides the critical foundation and nerve center for enabling predictive and prescriptive planning capabilities, optimizing parts inventory, and providing opportunities for broader leveraging of connected service platforms.

• When considering an investment in SPP technology, IDC Manufacturing Insights recommends that in addition to due diligence on industry-specific capabilities and customer references, manufacturers probe on a vendor's vision and investment plans for enabling more predictive service processes along with plans for leveraging 3rd Platform technologies.

• Technology selection teams must be well balanced with line-of-business, functional, and IT representation and should context a broader and deeper perspective in required SPP technology.

"In the coming years, manufacturers will continue to provide both competitive differentiation and higher margins by bundling or providing added services with products, including product-as-a-service business models where customers pay for product operational uptime and performance, over time," said Heather Ashton, research manager, Service Innovation and Connected Products, IDC Manufacturing Insights. "[We predict] that by 2020, onboard service revenue will outpace product-related revenue by a factor of two. Customers benefit from such service programs through optimized usage of equipment and products, higher productivity and decreased support costs."

The majority of manufacturers are just starting down the path toward service innovation. The goal of connected service platforms is to transform after-sales service from reactive- to predictive-focused processes. With the emphasis on predictive, the paradigm of the service supply chain shifts toward early warning mechanisms, maximized uptime, and needs for precise synchronization of service events. This includes onboard and self-communicating diagnostics, providing early warning to operating issues, more responsive networks of service parts, and service depot suppliers as well as highly networked maintenance facilities.

The research and consulting firm recommends technology selection teams garner a broader vision of connecting the process components that will foster service innovation. This would include stronger process and information linkages among product lifecycle management, service lifecycle management, and customer relationship management. A further consideration is the trend across multiple industry segments of fostering new and existing product innovation by incorporating more and more software and digitally based product components within physical products.

Source: IDC Manufacturing Insights

After-Sales Service, Parts Management to Become More Important to Manufacturers' Profitability, Report Says