There’s only so much manufacturers can do to increase their profit margins. After a point, cutting costs and raising product prices become counterproductive. With rising global competition, product price deflation, and increased commodity prices, many product-based companies are seeking alternatives for new revenue streams to sustain profitability.

While product lifecycle management (PLM) ensures product quality and quick time to market, offering value-added services is emerging as a lucrative option for creating new revenue streams for manufacturers. A survey suggests that 74 percent of executives in the manufacturing industry consider these services to be a significant driver of future revenues. Product-based companies are changing their business models and incorporating as-a-service offerings with their products for higher revenues and enhanced customer satisfaction.

Toward a Circular Economy through Service Transformation

For manufacturers, servitization has become a game changer. Projections indicate that by 2020, manufacturers will earn half of their revenues from services. A case in point is a multinational electronics major that manufactures lighting equipment. It partnered with a tech service company to provide lighting-as-a-service to an airport outside Amsterdam.

By taking complete ownership of the fixtures and installations, and billing the airport for the light it uses, the company actually earned more than it would have if it just sold the lights. Also, servicing the lights on time helped extend the life of the fittings by 75 percent. The company minimized wastage and reduced raw material consumption by recycling the products at their end of life, showing how manufacturers can play their part in sustaining a circular economy.

With technologies such as IoT, the lighting major also managed to monitor performance and durability of the lighting systems. It is little wonder then that 79 percent of manufacturers believe that powering service-based offerings with advanced technologies helps widen the customer base.

Manufacturers of complex products such as airplanes also seem to be subscribing to this notion. By maintaining their own manufactured assets, they can generate a steady revenue stream from 20 years up to 40 years. This enhanced performance can be traced back to the development of a digital thread and digital PLM that has facilitated accurate decision-making on the product, while reducing downtime.

Tying PLM and Services

Establishing a digital thread between the factory-floor PLM and on-field services enables real-time communication between engineers and technicians. This allows manufacturers to better understand design issues and performance gaps, improving product quality and functionalities. Analytics is key to optimizing the entire value cycle, involving supplier performance, product costing, field service management, and customer support.

Service lifecycle management (SLM) solutions that leverage data analytics can help manufacturers maximize business value. SLM simplifies the complex process of fulfilling service requests, which involve regular back-and-forth between the contact center, remote data monitoring wing, spare parts inventory, repair team, warranty manager, and knowledge aggregator. Sharing data between SLM and PLM empowers manufacturers to enhance service planning, update service work instructions based on product changes and upgrades, and effectively gain insights from the field.

Technologies Facilitating Service Optimization

Digitalization can make services more effective and efficient, increasing their market impact. For instance, a collaborative platform combined with augmented reality (AR) wearables, such as smart glasses and smartphones, can maximize the repairing efficiency of field technicians. Manufacturers are also leveraging service robots, blockchain, digital twins, and machine learning for their service processes to restore machines and reduce maintenance costs.

Machine learning technology, in particular, can significantly minimize equipment downtime. AI-powered condition-based monitoring and predictive maintenance systems can track industrial assets more accurately, enhancing service quality. Technology companies are at the forefront of this service revolution. For example, a company providing predictive analytics for industrial machines offers a solution that identifies and categorizes “behaviors” in the factory by utilizing automated machine learning and multivariate analysis of time series data. This allows plant operators to track a machine’s operational condition in real time.

Manufacturing industries are waking up to the opportunities brought about by these technologies. Global industrial giants are attempting to improve service quality by leveraging and extending digital PLM for service transformation. They are reducing downtime via IoT-led smart services, PLM/SLM-driven service BOM management, smart spare planning, and the use of mobile platforms with AR/VR for remote maintenance. Predictive maintenance with data analytics is also improving throughput and productivity.

With advancements in service management technologies, companies are shifting from selling products with traditional warranties and service contracts to offering products with IoT-powered, consumption-based service. Manufacturers going the products-as-a-service way are redefining their revenue priorities. Soon, a time may come when a manufacturer will be handing out free products and only charging for the service!