What is servitization? How does it affect manufacturers?

10 December 2018

Servitization is becoming an increasingly common term for manufacturers around the world. However, a clear understanding of what servitization is and how it affects manufacturers is much harder to come by.

We’ve produced a white paper to demystify the subject of servitization. For those on the go, here’s the TL;DR.

What is it?

Machines that perform a specific function (e.g. welding, blowing, moving) can be sold as a guarantee of the service that they provide, rather than the machine itself and a large maintenance package. For example, welding-robots can be sold as a subscription of ‘welds per hour’ and aircraft can be sold as ‘flight-hours per month’. 

ServitizationServitization is a great success in some niche areas and ‘edge applications’ such as aerospace, with Rolls Royce’s ‘Power-by-the-Hour’ program arguably the most famous example.

Other sectors such as agriculture and transport have also enjoyed success with servitization from tractors to trains, and today there is enormous potential to roll out similar arrangements across other industries.

What’s more, many businesses in other sectors may be more familiar with servitization than they realize, having already adopted a similar approach when it comes to outsourcing peripheral activities, such as cleaning or building services.

In essence, servitization simply extends that model to include functions that are central to the core business. For instance, equipment suppliers sell the benefits of their machinery - the capacity they deliver - as a service, rather than simply selling the machine itself.

Who benefits?

Whilst it does shift risk of performance onto the supplier, everybody benefits. Servitization focuses the mindset of the industry on performance and delivered capability, the potential savings in time and  money for those choosing servitization are huge.

For end users servitization promises to reduce the risk of investing in new equipment, as well as increasing efficiency and slashing downtime. For the equipment supplier servitization improves relationships with end-user customers and increases transparency around how equipment is performing in the field.

What does this mean for industry?

Delivering servitization effectively requires a two-way flow of data and information throughout the supply chain, supported by scalable condition monitoring so that equipment suppliers can monitor the performance of their assets remotely and predict when maintenance is needed. This means resources are not wasted (maintenance effort and spares) on maintaining assets that could continue running without a hitch for the next few months. Ultimately, of course, everyone benefits by not being left to deal with unplanned shutdowns.

True predictive maintenance has been tricky to achieve until quite recently, since it traditionally demanded huge amounts of time and expertise from data specialists to spot when problems were about to occur. That is now changing thanks to the arrival of intelligent software products such as Senseye, which leverages the economies of scale of cloud computing and advanced machine learning algorithms to automate the entire process.

 

New call-to-action

Keep me notified

Most Read

Try Our Free ROI Calculator