The steps of servitization for manufacturing are similar to those for other industries, but with some specific considerations. Here are the steps that a manufacturing company can follow to adopt a servitization strategy:<\/p>
In addition to these steps, a manufacturing company should also consider the impact of servitization on its core business, including the impact on manufacturing processes, product design, supply chain management, and overall profitability. By following these steps, a manufacturing company can adopt a servitization strategy that provides additional value to customers, generates new revenue streams, and enhances its competitive position.<\/p>","@id":"https:\/\/www.the-future-of-commerce.com\/2022\/12\/08\/servitization-manufacturers-services\/#Answer2"},{"@context":"http:\/\/schema.org","@type":"Answer","text":"
There are various types of servitization, each with different characteristics and benefits for customers and companies. Here are some of the main types of servitization:<\/p>
Each type of servitization offers different benefits and challenges, depending on the nature of the products and services involved, the target market, and the company's overall business strategy. By understanding these different types of servitization, companies can identify the most appropriate approach for their specific needs and goals.<\/p>","name":"What are the types of Servitization?","@id":"https:\/\/www.the-future-of-commerce.com\/2022\/12\/08\/servitization-manufacturers-services\/#Answer3"},{"@context":"http:\/\/schema.org","@type":"BlogPosting","abstract":"As consumers, we\u2019re used to the as-a-service model in our everyday lives. When was the last time you bought a CD or DVD? I can\u2019t remember because my whole family streams everything. My sons and I even get my razor blades and shaving cream as-a-service. Of course, I still seem to be paying for everything, but that\u2019s a different story!","about":["http:\/\/www.wikidata.org\/entity\/Q18413018","https:\/\/www.the-future-of-commerce.com\/2022\/12\/08\/servitization-manufacturers-services\/#About","http:\/\/www.wikidata.org\/entity\/Q109662505","http:\/\/www.wikidata.org\/entity\/Q56226795","http:\/\/www.wikidata.org\/entity\/Q61040026","https:\/\/en.wikipedia.org\/wiki\/Service_economy","https:\/\/en.wikipedia.org\/wiki\/Business_model"],"url":"https:\/\/www.the-future-of-commerce.com\/2022\/12\/08\/servitization-manufacturers-services\/","mainEntityOfPage":"https:\/\/www.the-future-of-commerce.com\/2022\/12\/08\/servitization-manufacturers-services\/","description":"With the as-a-service model, manufacturers are going beyond product sales and developing ongoing customer relationships.","name":"What is Servitization: Manufacturers get serious about services","headline":"What is Servitization: Manufacturers get serious about services","dateModified":"2023-02-15","datePublished":"2022-12-08","keywords":["Manufacturing","Service","https:\/\/www.the-future-of-commerce.com\/2022\/12\/08\/servitization-manufacturers-services\/#BlogPosting#3"],"wordCount":1423,"articleBody":"As consumers, we\u2019re used to the as-a-service model in our everyday lives. When was the last time you bought a CD or DVD? I can\u2019t remember because my whole family streams everything. My sons and I even get my razor blades and shaving cream as-a-service. Of course, I still seem to be paying for everything, but that\u2019s a different story! What is servitization? Servitization is a concept of selling an \u201coutcome as a service\u201d as opposed to one-off sale. With a servitization business model, customers pay a fixed cost per-unit of service consumed, while the ownership of the system remains with the technology provider, who is also responsible for all operational costs. Servitization was popular in manufacturing dating back to the 1980\u2019s as a way for manufacturers to differentiate themselves from their competition and find ways of getting closer to their customers. It\u2019s increasingly expanding from a consumer model to a broader business approach when the capital expense of a piece of equipment is often a barrier to buyers. Manufacturers are attracting customers by providing access to equipment and billing monthly based on usage metrics like hours of usage, or throughput. They do this by creating an ongoing relationship based on a monthly transaction monetarized by such things as usage, uptime or utilization rather than a one-time transaction or sale. When you turn services into a growing, vibrant part of your business, you can open new sources of revenue and improve margins while simultaneously staving off commoditization and making sustainability a differentiator. Servitization requires smarter products To enable servitization, equipment manufacturers must create more intelligent products to capture the information required to bill the customer accurately. They also need to ensure the equipment is always working and have the data available to predict required maintenance before it breaks down. Embedded internet of things (IoT) enables sensors to capture pertinent information such as usage, throughput and equipment performance to drive the as-a-service business process. By creating a digital twin of the equipment, both the manufacturer and customer can monitor the performance and leverage machine learning algorithms to identify how efficiently it is being used. Reinventing service models Let\u2019s use a fictional example of a company that manufactures washing machines and wants to introduce a \u201cwash-as-a-service\u201d model, where they bill customers based on the number of washes the machine performs monthly. If the customer is a family of five that uses the washing machine daily, they would pay more than a single person who uses it once a week. But the common denominator is that the washing machine must work at peak performance whenever it\u2019s needed. This new service offering requires outcome-based contracts that include performance measurements of wash cycles and Service Level Agreements (SLAs) with 100% availability. To build an immersive customer experience, an app could provide real-time data about their wash cycle: when it\u2019s finished, how many have been run that month, cost, carbon footprint and how well the machine has performed. This information is leveraged by the manufacturer and a third-party maintenance organization to manage the end-to-end service lifecycle by integrating all aspects, from installation management, warranty, service ticketing, field service, in-house repairs, billing, and finance. The service will also reduce the overall environmental impact of the machine by tracking energy and water consumption, as well as managing de-commissioning and recycling to keep the equipment within the circular economy. Service precision reduces costs and improves CX The availability of machine data helps the manufacturer and service partner rethink service management operations by leveraging AI-enabled advanced scheduling to prioritize engagements, improve resource utilization, and reduce travel times. When a service technician is sent to repair a machine, they have all the necessary parts and the breakdown information at their fingertips on a mobile device. They can even be walked through the repair by using augmented reality glasses. This means the problem can be resolved in one sitting without lengthy delays caused by ordering replacement parts after the appointment. Servitization: Revolutionizing equipment ROI With improved visibility from IoT sensors designed into the washing machine, the manufacturer can now continuously monitor the performance of all equipment in use. This enables them to track the health, and performance against the SLAs. They can also leverage the data from across all machines and use artificial intelligence algorithms to identify trends and predict risk of failure. They can then propose preventative maintenance approaches to reduce breakdowns and boost customer service. This information can also be fed back into the R&D teams to design out any common issues in the next iteration of the machine. It\u2019s clear that the as-a-service business model is here to stay both in our personal lives, and increasingly, to drive across-the-board gains for today\u2019s businesses. Frequently asked questions (FAQs): What is the meaning of Servitization? Servitization means delivery of a service offering instead of selling the product out right; in some cases servitization deals with delivering value-add services that are repeatable and predictable beyond just selling the product. It is a business approach to building revenue streams from services. It is a concept of selling an \u201coutcome as a service\u201d as opposed to one-off sale. What are the steps of servitization? The steps of servitization for manufacturing are similar to those for other industries, but with some specific considerations. Here are the steps that a manufacturing company can follow to adopt a servitization strategy: \u2022\tIdentify customer needs: A manufacturing company should identify the customer needs that can be addressed through servitization, such as after-sales services, maintenance, repair, training, and customization. \u2022\tDefine the service offering: Based on the identified customer needs, the company should define the range of services it will offer, how they will be bundled with the products, and how they will be priced. \u2022\tAssess the feasibility: The company should assess the feasibility of offering the services, including the resources required, the technology needed to deliver the services, and the impact on the core business. \u2022\tDevelop the service infrastructure: The company should develop the necessary infrastructure to deliver the services, including IT systems, staff training, and partnerships with service providers. \u2022\tTest the service offering: The company should test the service offering with a small group of customers, gather feedback, and make improvements based on the feedback. \u2022\tLaunch the service offering: The company should launch the service offering to the market, promote it through targeted marketing campaigns, sales efforts, and customer support. \u2022\tEvaluate and refine the service offering: The company should continuously evaluate the service offering, gather customer feedback, analyze performance data, and refine the offering to meet changing customer needs and market conditions. In addition to these steps, a manufacturing company should also consider the impact of servitization on its core business, including the impact on manufacturing processes, product design, supply chain management, and overall profitability. By following these steps, a manufacturing company can adopt a servitization strategy that provides additional value to customers, generates new revenue streams, and enhances its competitive position. What are the types of Servitization? There are various types of servitization, each with different characteristics and benefits for customers and companies. Here are some of the main types of servitization: \u2022\tProduct-based servitization: This type of servitization involves offering additional services that are directly related to the product. For example, a company that manufactures printing presses might offer a maintenance and repair service for the presses it sells. \u2022\tUse-based servitization: Use-based servitization involves charging customers for the use of a product, rather than selling the product outright. This approach can include a range of services, such as maintenance, upgrades, and replacements. \u2022\tOutcome-based servitization: Outcome-based servitization involves offering a service that guarantees a specific outcome, such as a certain level of performance or cost savings. For example, a company that provides heating and cooling systems might offer a service that guarantees a specific level of energy efficiency. \u2022\tSolution-based servitization: Solution-based servitization involves offering a complete solution that includes both products and services. For example, a company that manufactures machine tools might offer a turnkey solution that includes design, installation, maintenance, and training. \u2022\tData-based servitization: Data-based servitization involves using data from products and services to create new value for customers. For example, a company that provides fleet management services might use data from vehicles to optimize routes, reduce fuel consumption, and improve maintenance schedules. Each type of servitization offers different benefits and challenges, depending on the nature of the products and services involved, the target market, and the company\u2019s overall business strategy. By understanding these different types of servitization, companies can identify the most appropriate approach for their specific needs and goals.","subjectOf":{"@type":"FAQPage","url":"https:\/\/www.the-future-of-commerce.com\/2022\/12\/08\/servitization-manufacturers-services\/","mainEntityOfPage":"https:\/\/www.the-future-of-commerce.com\/2022\/12\/08\/servitization-manufacturers-services\/","name":"What is Servitization","about":["https:\/\/www.the-future-of-commerce.com\/2022\/12\/08\/servitization-manufacturers-services\/#About","http:\/\/www.wikidata.org\/entity\/Q18413018","https:\/\/en.wikipedia.org\/wiki\/Service_economy","http:\/\/www.wikidata.org\/entity\/Q179106","http:\/\/www.wikidata.org\/entity\/Q112730899","https:\/\/en.wikipedia.org\/wiki\/Service_(economics)","http:\/\/www.wikidata.org\/entity\/Q815823"],"mainEntity":[{"@type":"Question","name":"What is 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