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Growth through service in manufacturing | Changing your business model

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Growth through service in manufacturing | Changing your business model

As buying behaviour evolves so does the traditional supply chain network, with lines blurred between traditional distribution and purchasing points.  Not just in manufacturers selling direct to end users by being their own distributor / retailer, or retailers specifying new product lines direct to lean manufacturers,  or retailers moving into the wholesale space (think Tesco’s acquisition of food supplier Booker recently).  Much of this comes from the need to be more flexible in service and product offering as a competitive strategy to win and retain more customers; but also to control margins, process and responsibilities. Introducing service in manufacturing is another example of this changing supply chain that we will focus on in this blog.

What is this trend in offering maintenance service in manufacturing?

As globalisation has developed within manufacturing supply and demand, there has been a lot of shared knowledge and best practice over the last 20 years.  According to an article in Industry Forum “At the European level, manufacturing firms have been increasingly offering services along with physical products. Between 1995 and 2005, the share of services in the output of manufacturing industries increased in most European countries. The highest service shares are found in small countries with high R&D intensities whose service output consists mostly of knowledge-intensive services.”

Model of manufacturing supply chain from GovUK_edited

The UK Government set out the simplified manufacturing supply chain and looked forward to the future in their Future of manufacturing: a new era of opportunity and challenge for the UK whitepaper:

“It is now clear that physical production is at the centre of a wider manufacturing value chain… Manufacturers are increasingly using this wider value chain to generate new and additional revenue, with production playing a central role in allowing other value creating activities to occur. For example, 39% of UK manufacturers with more than 100 employees derived value from services related to their products in 2011, compared with 24% in 2007. This typically involves supporting or complementing products, and offering outcome or availability based contracts for products. Not all manufacturing firms report service revenue separately, and there is no requirement for them to do so. However, in 2009 Rolls Royce reported 49% of its revenue from services, and Arcelor Mittal reported 29%.”

This same interesting report, discusses more widely what the manufacturing industry would look like in future; including aspects of process, practice, locations, technology, facilities and people. We recommend a thorough read, particularly if you are looking at change management in your organisation.

Making the move to a complementary service model in manufacturing

There is a definite cultural change of mind-set when shifting the business model to encompass an ongoing service maintenance offering.  It means looking beyond the production floor and putting the customer at the heart of your business; resulting in more flexibility and responsiveness.  Of course this means adopting leaner production processes, upskilling your people and using best practice in technology.

How can technology link the production floor and the service experience?

Imagine this scenario… a boiler manufacturer alters their production process and BOM to include an installed remote sensor.  The boiler is installed by the service engineer, a few months later the boiler starts running too hot, the temperature reading is sent through an IoT connected sensor.   An alert is received that the boiler is in distress – your field service management system automatically creates a work order and dispatches a technician to look into the issue without any human intervention or initiation.

Consider harnessing the power of Internet of Things (IoT) in manufacturing with the concept of “connected field service” – which results in preventative maintenanceConnected Field Service allows your business to detect, troubleshoot, and resolve issues remotely so a technician is despatched only when necessary.  One step further within IoT is the facility to attempt to complete self-healing repairs remotely before sending out a technician.

Organisations know about problems and solve them at minimal cost before their customer even becomes aware of the issues. Proactive problem solving and remote troubleshooting helps to improves customer satisfaction and resource productivity.

Download the Smart IT in field service whitepaper so you know what is possible.

How can Microsoft Dynamics 365 for Field Service help with the transition?

Because Microsoft Dynamics 365 applications work seamlessly together to manage specific business processes across Finance, Operations, Field Service, Sales, Marketing, Customer Service, HR and Project Service Automation; manufacturers can easily add on the field service management app when they are ready to make this change.  Minimal business disruption, shared information, better collaboration and a familiar way of working across the business.Dynamics 365 for field service flow

Download the Dynamics 365 for Field Service factsheet to find out more about the functionality this business application brings to help with managing service contracts, resource and scheduling, inventory control and remote maintenance.

To help you prepare your business case for a maintenance solution, download the field service whitepaper, and speak to our manufacturing and service industry specialists at Prodware.

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