At your service - how manufacturing is embracing the global shift towards servitization

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The trend toward subscription models and buying products as services is well understood by consumers, as we pay to stream films through Netflix or listen to music through Spotify, and we are also increasingly convinced to purchase car servicing, consumer products and home appliances on subscription. We don’t own the programmes or music, but they are available whenever we want, and we are happy that our entertainment needs are being met.

Applying the same logic to manufacturing may seem less straightforward but it is not a totally alien concept. As early as 1962, Rolls Royce was offering engine and accessory replacement on a fixed cost per ‘flying hour’ basis. ‘Power by the Hour’, as it was known, was an early pioneer of what we now call ‘servitization’, but advancements in digital technology are enabling even more manufacturers to deploy similar models and drive significant growth.

To best enable manufacturers to deliver these diverse revenue streams and easier business value realization, value-based after-market service needs an integrated technology platform that brings together EAM, ERP and FSM.

Out with the old – reactive and preventative maintenance

Historically the most common types of maintenance and service models were ‘reactive and preventative’. ‘Reactive’ being the easiest to understand – when a piece of equipment breaks, the owner arranges for a repair. Preventative maintenance attempted to address this rather simplistic approach and involves regular planned maintenance visits where parts are replaced to a schedule.

While a seemingly effective strategy, planned maintenance is incredibly inefficient. Since parts are replaced and equipment taken out of action for maintenance irrespective of whether it is necessary, there are high financial and environmental costs and high levels of downtime and inconvenience for the user of the equipment.

Sensors, data and analytics – enabling predictive maintenance

To solve this, manufacturers have started using IoT technology and sensors to collect and analyse the operational data, so fact-based ‘predictive’ maintenance models can be developed. It is this technology that has had a significant impact in allowing manufacturers to develop servitization models through ‘predictive’ maintenance.

Predictive maintenance has seen maintenance models shift so they are based on the ‘condition or use’ of the equipment. Sensors monitor all aspects of the equipment and the most effective models use IoT technology so this data can be monitored online. This moves maintenance to a fact-based model with only the necessary parts replaced. Downtime is also reduced, leading to significant cost savings, reduced environmental impacts and happier customers.

Collecting data is only part of the challenge and powerful analytical techniques are required to turn the data into meaningful information. Data overload is a real danger but our technology at IFS can decipher data and identify the root cause of malfunctions. The AI and ML solutions we develop provide powerful anomaly detection, showing the significant events that need attention so practical maintenance programmes can be initiated. It is important that recommendations made by our platform are trusted by the users which is why we use AI to make ‘meaningful observations’, effectively drawing attention to an anomaly but also explaining why it has been flagged as significant.

The future is proactive

Technology is also powering the development of the next stage of maintenance, as companies move from ‘predictive’ to ‘proactive’ models. In these models, a manufacturer moves to selling outcomes rather than equipment . For example, an elevator manufacturer would no longer sell elevators but the ability for people to move efficiently around a building. The building operator will generally have little interest in the belts and pulleys that operate their elevators but will happily buy a service that guarantees 100% uptime.

IoT technology and advanced data analytics make this level of servitization a reality and it shows how manufacturing can use a servitization model similar to the Netflix or Spotify subscriptions we enjoy at home. But to best enable manufacturers to deliver these types of diverse revenue streams and to see easier business value realization, value-based after-market service needs an integrated technology platform that brings together EAM, ERP and FSM with their industry-specific use cases in mind. A single cloud-based platform also lowers the total cost of ownership, ultimately yielding a better RoI.

A win-win – why manufacturers should rise to servitization

By aligning the interests of the customer with those of the manufacturer, servitization ensures everyone benefits. It is now in the manufacturer’s interest to ensure they produce and maintain high quality assets because this ensures they can provide the highest quality service for their customer.

Servitization also ensures manufacturers effectively become strategic partners who are intrinsic to their customers’ businesses. Using the elevator example again, the manufacturer has strengthened its role within the client-company, because it is now responsible for the happiness of hotel guests by ensuring they can freely move around the building. They no longer just fix the lifts.

Switching to this mindset can be challenging for some manufacturers, but the ones that do will be rewarded with higher customer retention and increased revenue through subscription fees. A good starting point would be to stop viewing the sales process as a single transactional sale and start looking at it as the start of an ongoing, mutually beneficial, strategic relationship.