Digitized Dealers
Recent changing market dynamics have put equipment service profitability and margins at risk. This increased competition and slim margins in equipment sales and the rental market place a heavy burden on manufacturers, dealers, rental companies and service businesses to improve their service performance. Improving service in these conditions is critical to maintaining margins and growing profitability. In order to compete effectively, world-class service organizations are adopting equipment service management (ESM) processes and tools. This approach provides organizations with an integrated view of their business, so they can improve the value their customers derive from their equipment and subsequently improve their own profitability.
Equipment Service Management: Opportunity and Challenge
Equipment service management has become simultaneously more strategic and more competitive over the past few years. Manufacturers and resellers have shifted their view of service from an unwanted by-product of a successful equipment sale to a strategy for profitable growth. Why? Manufacturers have recognized the high levels of profit available in the service life cycle and have shifted 180 degrees from viewing service as an obligation to viewing service as a strategic opportunity. Smart companies have realized that the total life cycle profitability carries the potential to be many times higher than the margin on the initial equipment sale.
This added focus on service has dramatically heightened competition on a global scale. This shift puts pressure on manufacturers and service companies alike, as they are now fighting for the same, limited service budgets from equipment owners. At the same time that competition has grown stiffer, customers have begun to expect more from their equipment and their service contracts. Equipment owners are demanding higher levels of performance and availability. They want contracts based on the value they receive from the equipment, instead of a straight warranty or break-fix support.
Customer demands for shared risk, commoditized pricing on equipment and stiffer service competition require manufacturers, dealers, service businesses and rental companies to get the most out of every opportunity. These companies are turning to ESM in order to maximize the profitability of each piece of equipment they support, while simultaneously maximizing the value their customers receive from the equipment.
Gaining Operational Control of Service
Stiff competition means that companies can’t afford excess inventory or the cost of expediting parts. Equipment companies need to have a good parts planning process at the enterprise level. Increasingly complex warranties and entitlements, often consisting of bundled warranties that cover an integrated piece of equipment (such as a hauler with onboard diagnostics or a GPS tracking system) have to be managed closely. Manufacturing, equipment preparation and systems integration all require project management control in addition to process control. Additionally, control has to extend beyond the office — into the field, to the sales counter, to remote depots and to rental operations. Control requires processes and status transparency across the business.
Companies in control can get in front of failures and move to predictive and preventative service to get away from a break-fix model and improve uptime and availability. To accomplish this, they need the right technology in place to service at the right time, with the right skills, the right tools, and the right parts in the right location. Today’s service level agreements (SLAs) and performance-based contracts put service companies at risk, demanding higher levels of control.
Equipment Intelligence and Confidence in Service Knowledge
Beyond control, world-class service organizations must possess a deep understanding of the equipment that they service. These companies must know their customers’ equipment better than their customers know it. This knowledge extends to service history, but also to the value the equipment provides to the company operating it and the profitability it generates for the service business itself. An organization that is in control should be able to develop a profit and loss by each individual piece of equipment that incorporates all activities, all costs and any overhead, such as dedicated repair facilities. Companies should be able to measure equipment value and profitability, but that is difficult or impossible with data spread across disparate systems and paper records. Adequate enterprise technology can help break down these silos and provide organizations with the necessary information in real time.
Pulling It All Together for Proactive Service Management
The combination of control and equipment knowledge allows the world-class service organization to be proactive about service. This goes well beyond preventative maintenance by leveraging equipment knowledge to help companies address problems before they occur. Beyond fixing problems early and reducing costs, a proactive view helps to increase the value the customer receives from their equipment. By having the right equipment intelligence consolidated and available, service organizations can improve both sides of the profit equation — revenue and cost.
Most companies lack the integrated systems infrastructure to control their service operations. Without an integrated solution, they struggle to gain visibility into accurate equipment knowledge. They are unable to “pull it all together” effectively to service equipment proactively and make better business decisions. The myriad of point solutions that most companies operate with don’t allow for a consolidated view of their business. The data is in too many places and in too many different formats. In this scenario, it is almost impossible to really understand where money is being made and lost. Companies can’t analyze and measure without knowledge and can’t manage without transparency.
ESM is the key to enhanced profitability in the service industry. World-class service organizations are gaining control of their operations and establishing confidence in their equipment intelligence. Through these two fundamental capabilities, they are equipped to provide more proactive service, increase equipment reliability, enhance equipment performance and deliver real value to their customers. By leveraging an integrated ESM approach, these companies are raising the bar on services to bypass the competition and grow their businesses for years to come.
Warren Smith is the global industry director of equipment at Infor, headquartered in New York.
