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Servitisation of Manufacturing

Manufacturers produce goods and sell them in the market. They do so repeatedly. They produce and they sell. There is no other revenue model for them. Now, what if the company adds a ‘servicing’ component to its manufactured product. That’s Servitisation of Manufacturing.

Caterpillar, Alstom, Xerox have already ‘servitised’ their manufacturing. And the trend has caught on now. Many manufacturing enterprises are getting into the service play as well and are bundling their product with services. The idea is increase revenues from the customer already acquired – increasing the LTV (life time value).

Looking at the ‘Why of Servitisation’.

Manufacturers have several reasons to be motivated about Servitisation. The servitisation model allows for an increase in the revenues, improvement in the profits, enhancement in the customer value, addition of newer revenue streams, establishment of customer loyalty and an increased life time value of the customer. The opportunity to derive advantages out of servitisation is making several manufacturers shift to this model.

But how easy is it for a manufacturing company to get into services as well. Culturally companies could be get into a different space. Capabilities-wise as well the companies will have to now have different skills in their ranks. Some of the successful transformations (servitised models) would give us some insights on how to pull this off.

Let us see what Caterpillar has done.

Caterpillar has introduced Cat® Product Link. This is a remote tracking and monitoring service from Caterpillar. This application helps clients with the equipment location and alerts them of preventative maintenance. Caterpillar tracks the equipment from afar by way of the data transmitted from the equipments.

Likewise, Alstom has something up their sleeve as well.

Alstom tracks the number of hours lost by the customer remotely due to their product malfunctioning and compensates the customer. The service includes maintenance support, technical support and performance improvement.


Xerox has servitised their manufacturing.

Xeros is moving away from being only a photocopy equipment manufacturer to a business processes and management company. In terms of new business, Xerox has more than fifty percent coming from services. Some of the new ‘service’ areas that Xerox has entered are: document publishing, document management, and also BPO.

So, when are you taking your manufacturing business to the next level i.e. when are you planning to adding Advanced Services to your offering?

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CATEGORY: Management

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