Servitization may be a new word to some, but it has become a common strategy for leading manufacturers seeking ways to grow profits and improve customer satisfaction. Instead of focusing entirely on selling products, this strategy involves addressing the increasing needs and satisfaction of customers by increasing product uptime and the outcome it delivers, as well as developing an entire field service support system. Manufacturers interested in being proactive and staying ahead of the curve should do a serious review of successful business models and what is required to make this shift. Below is a look at some top issues to make servitization a reality.

Revamp the Service Supply Chain
Think about the old, established supply chain in manufacturing. A company produces and sells a piece of equipment. The equipment fails in some way and requires repair, causing frustration and costly downtime to the customer. However, in today’s competitive world, customers are demanding that products remain running at all times. As a result, manufacturers need to move towards making parts available when needed as well as proactive maintenance contracts to prevent breakdowns.

Gear Up for Recurring Revenue via Subscriptions
Traditionally, manufacturers have reported on a number of widgets sold or perhaps also on service revenues. Customers purchase a product or piece of equipment, own it, and are separately responsible for all service needs. Now, successful manufacturers are moving more towards becoming subscription-based, where their reporting is based on recurring revenue from subscription services. Customers are more satisfied with less if no downtime. An added benefit is the “stickiness” it creates with the client who develops an ongoing relationship with the manufacturer to maintain value and output.

Embrace Dynamic Pricing for Service Parts
Many manufacturers continue to use outdated methods for parts or service contracts, like “cost-plus.” Instead, they should seek optimal pricing based on competitive differentiation. The focus should begin with determining what services will make the customer have a great experience while allowing the manufacturer to maximize revenue.

If you haven’t already done so, manufacturers must begin the process of long-term planning and strategy to stay in for the long haul. Servitization is one major part of this process.

Proto Machine & MFG, Inc. specializes in precision turning and milling for a wide spectrum of customers ranging from commercial, aerospace, oil industry, and government. We have a steadfast commitment to quality, providing customized parts production, long and short production runs, and small assembly. To learn more, call us at 330-677-1700 or visit our website.

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Sources:

https://www.manufacturing.net/blog/2019/05/3-biggest-needs-manufacturers-servitization-booms

https://www.msidata.com/what-is-servitization