Service as a Product Changing the Supply Chain

For manufacturers, services focused on reducing time to market are essential to success.

Manufacturing firms are interweaving new services with product offerings to more effectively differentiate themselves, according to a new report from Oxford Economics, in cooperation with PTC. These researchers conducted a survey of more than 300 manufacturing executives during the first quarter of 2013, and found that those services focused on reducing time to market (52%), accelerating product innovation (43%) and reducing product development costs (40%) were most important. The researchers also determined, however, that in three years, accelerating product innovation will move from the second-most important value driver to the most important (50%), followed closely by reducing time to market (47%) and increasing service revenue (39%).

Over 40% of survey respondents were C-level executives, with the rest being direct reports to C-level executives. The top five job functions were supply chain/manufacturing, product/engineering, IT, strategy/corporate development, and service. Annual revenue for surveyed organizations, which were split into almost four equal parts, ranged on the low end at $250 million to over $5 billion.

Geographically, more firms in Europe (74%) are expected to overhaul their basic operating models than those in North America (64%) and Asia (67%).

Among the steps being taken is heightened coordination of strategy and planning between engineering and service functions, which will rise from 54% today to 73% in three years according to the survey.

Better coordination between engineering and service divisions dovetails with greater intent by executives to use feedback from service execution (52% today) to drive decisions and enable improvements to product development and quality (65% in three years).

“Smart” products—software-intensive, networked products that have sensors and connections back to the original manufacturer—are key to creating product-as-a-service offerings, the report states. For example, because smart products are connected, they can report service needs before failure.

Greater emphasis on smart products indicates that a solutions- and systems-level focus is gaining traction among manufacturers, according to Paul Camuti, Senior Vice President and Chief Technology Officer at Ingersoll Rand. “What we’re trying to do as a company is to systematically apply information and communication capabilities across the whole product portfolio in order to move from being a supplier of hardware to a supplier of lifecycle customer experience.”

 

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