Servitization: as-a-service manufacturing in industry

Industrial servitization is a hot topic right now as new technologies emerge that harness real-time data. In an increasingly competitive market servitization is the way to open new business lines, improve customer loyalty and, in addition, comply with sustainability goals. Manufacturers can now make a profit from services by making their products last longer and avoid waste as much as possible. They can also recycle parts of broken products for reuse or recycle an integral part of these services.

Smart Manufacturing
Written by:
Barbara

Servitization is not new, not for many y sectors. It basically consists of offering services linked to a product. We already see it, for example, in the maintenance service for household appliances (a small fee that entitles us to periodic check-ups and repairs), or in the offer of proprietary content associated with our cell phone, such as Apple TV. While the big manufacturers of yesteryear had relatively little competition and were content to produce, sell, and forget about that customer - at most, incorporating some programmed obsolescence so that they would have to return within a reasonable period of time. Today they seek continuity of the relationship, to create long-term 'fans' rather than mere buyers. And, of course, to reap the corresponding economic rewards. 

Industrial servitization is particularly a hot topic right now as new technologies emerge that can harness real time data . In an increasingly competitive market servitization is the way to open new business lines, improve customer loyalty and, in addition, comply with sustainability goals. Manufacturers can now make a profit from services by making their products last longer and  avoid  waste as much as possible. They can also recycle parts  of broken products for reuse or recycle an integral part of these services.

Servitization does not only offer a pre-sales and after-sales service. It is something more complex and complete, which can include a professional and expert consultancy, as well as different services.

Servitization a way to differentiate: from product to service 

Services account for 75% of the global economy and continue to grow rapidly. There is no doubt that a service company has some advantages over a product company: not least the issue of cost. While one only has to cover qualified personnel and office space, the other must face  the purchase of materials, the production chain, distribution etc and face squeezing margins everytime.  However, one of the most important aspect of servitization is customer loyalty. They are no so much looking for products per se but a complete experience. Today, we can purchase anytime, anywhere so the value of the brand (for the  manufacturer) lies in everything that surrounds that product: reliability, warranty, information, repairs ....

There are companies specialized in services in which servitization is evident and comes, so to speak, 'from the factory' (banking, for example). But others, such as manufacturing companies, are proving to be the most adept at applying this concept. It is no longer a question of manufacturing the best product, with the highest quality and at the best price, but of offering the customer those associated services that make the difference.

In the technology sector, for example, recent years have shown how components, or even the entire product, are purchased from other suppliers and then assembled and sold under a brand that creates an image and value for the customer and on which, in addition, services or other sales and purchase formats are offered.

Today, the production of almost everything has become so commoditized that customers  'do not care' about one brand or another, while the relationship with the supplier is something they do value and for which he would be willing to change.

A clear example is the leasing model, under which the user does not need to buy the product itself but acquires the right to use it for a certain period of time - this applies to cars, but also to large professional IT equipment or industrial machinery - with all its added services.

There would be different levels of servitization that could be divided into:

  • Basic or product service: the product itself and some related elements (warranties, spare parts, etc.). Once it leaves the factory, aside from compliance with current regulations, it no longer has anything to do with the manufacturer, nor does it provide any income.
  • Intermediate or after-sales service: this involves a closer relationship with the customer for a longer period of time (this could be insurance, maintenance agreements or incident attention, etc.). This would include product reconditioning or maintenance contracts.
  • Advanced service: The user does not 'buy' the product, but can pay for its use with a subscription model. These would be fleet management or monitoring solutions or any of the 'as-a-service' solutions now marketed in the technology sector.

Servitization models in the industry 

Although the theory of servitization is clear: moving from product to service, not all companies can approach it in the same way. Depending on their sector or type of product, they will have to opt for one of these different options:

Product model or industrial servitization

The company will continue to produce, 'manufacture' its products and accompany them with certain services such as warranties or after-sales service, thus taking advantage of its expertise to offer added value to the customer.

Performance model or value servitization 

This consists of a 180º turnaround to create new products, almost always digital, that the customer can apply to their processes or their day-to-day life and that completely change the relationship between supplier and customer.

Sales model or commercial servitization

New ways of engaging with the customer are created, and to this end, the traditional form of production may be altered.

All three models boost the digital transformation, which must cover all departments of the company. It’s not enough to just change the marketing or sales strategy if the rest of the areas do not follow suit. A profound transformation of the company is required. 

Edge computing, the Internet of Things (IoT) and associated sensors play an important role here and are key to making the servitized enterprise work.

The data collected from sensors will help the industry define the status of the components or to resolve maintenance incidents before they occur.

Barbara, the Cybersecure Edge Platform for industrial product servitization

Barbara's Cybersecure Edge platform for industrial product servitization provides the software infrastructure needed to achieve these goals and bring about this transformation to smart industry.

It brings advanced connectivity to the required industrial devices and provides remote update capability for automated ("zero-touch") deployment.

Beyond connectivity and intelligence, the devices are equipped with the necessary security for their future commercialization in accordance with the EU Cybersecurity Act.

Barbara is platform and hardware independent, which gives it greater flexibility to integrate with third parties.

Taking into consideration the different types of hardware available, both connectivity and sensors, a flexible and cybersecure technology becomes indispensable.

Also, in any Industrial IoT project, scalability is the most critical part. How to make the project scalable in time and resources?

For the deployment of the devices and their management, Barbara has developed the Barbara OS management panel that allows remote maintenance of the devices' service life. Through the console we can perform updates, configuration changes and respond to incidents centrally in real time.

Contact us to learn more.

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