Manufacturers Need New Revenue Streams
Product revenues in developed economies are stagnating. This can be attributed to two reasons. The macro-economic situation and the fact that developed markets are saturated. In pockets where volumes can still be depended upon, margins are under pressure. For OEMs, especially those in energy management, agro machinery, construction equipment, consumer durables, heavy equipment and building control systems, the uncertainty in developed markets has signaled a slow down on CAPEX. However, with continuous product sales over decades, manufacturers can devise ways to target service revenues from their installed base for business growth.
For them, the large installed base across multiple geographies presents the opportunity to connect with customers, tap service revenues, as well as improve loyalty. This could be by offering maintenance contracts/renewals, extended warranties, service plans, repairs and refurbishing, consumables/spare part sales, training and consulting, as well as end-of-life services. There are additional opportunities to retrofit and modernize the asset for existing customers. But these revenues are slipping through the fingers. With inadequate visibility into the installed base data, tapping the installed base service revenue is a challenge.
For the manufacturing industry, the urgency has always been on the product sales front. Service was not seen as a major source of revenue and was, therefore, ignored or managed largely through a network of shifting and changing partnerships. Yet another challenge has been the spate of acquisitions over the years which have led to fragmented IT systems that would have otherwise ensured a single source of (customer) truth. These factors have resulted in less-than-effective systems and processes to capture, update and retain customer information, product usage, product performance and service records. In other words, precious service revenues are being lost because manufacturers are unable to accurately identify the service needs of their installed base.
Data Spread Wide and Thin
For most OEMs, there are several hurdles to build a consolidated and dependable view of their installed base. This information is the foundation of a strong aftermarket service system.
The reality is that customer data is spread across multiple ERPs, CRM systems and different geographies. Several stakeholders touch the assets across their lifecycle, leading to disorganized and imperfect customer data. Repair centers offer repair services, warehouses dispatch spares, field tech workers examine and attend to the product, while the customer reaches out to contact centers that belong to different entities in the product value chain. The overall outcome is customer and product data that needs considerable effort to consolidate, clean up and enhance. This inhibits the OEM’s ability to offer post-sales services and derive value.
Additionally, complexities in a global supply chain make tracking assets a real challenge. Order could be placed on the parent company, get manufactured and shipped from another country, and could be handled by a sales center or external partner before it reaches the end customer. Along this chain, information related to the customer could be captured in different formats and different languages. Often, there is significant information loss about the end customer and the location of the equipment and other asset details. When equipment is moved by the customer to a new location or it becomes part of a merger or an acquisition, the gaps in information become larger.