For manufacturers around the globe already facing a number of policy, regulatory, and modernization challenges, the COVID-19 pandemic added another layer of disruption, shutting down supply chains and stalling or contracting economies. In 2019, respondents to an IDC survey of manufacturer and service organizations identified their largest challenge as expanding to new markets. One year later, many manufacturers who were seeking to expand may now have to put larger projects on hold as they shift focus to mitigate new economic risks.
One area, however, that manufacturers should consider for protecting existing revenue and creating new revenue is connected aftermarket services. Recent McKinsey & Company research found that average earnings-before-interest-and-taxes (EBIT) margin for aftermarket services was 25%, compared to 10% for new equipment. And in an example from one major manufacturing sector – Pega’s own “Global automotive customer expectations for aftermarket services” survey,” – we found that two-thirds of consumers seek service from providers unaffiliated with the brand of auto they own. When you look at these survey statistics together, they highlight an area that original equipment manufacturers (OEMs) should strengthen as a path toward growth. While OEM’s product-specific investments are challenged, OEMs can put their massive base of connected product and machine data to work to increase margins.
Connected products provide opportunities to grow revenue
Aftermarket services include standard service, parts, warranty, and recall events, and a new universe of revenue-generating, “As-a-Service” offerings all being supercharged through the proliferation of Internet of Things (IoT)-connected products produced by manufacturers. The greatest aftermarket opportunities now come from servicing always-connected customers along the lifetime of the always-connected products they own and use – including proactive, preemptive, and prescriptive service events, warranty, recall, field service, consumer apps, and loyalty programs triggered by connected product data.
For all these services, manufacturers need to be able to collect new data, link to old data sources, and combine customer and product data to understand what B2B customers’ and consumers’ needs are, and be able to take quick action to fulfill those needs – often without users having to take any action. But how does this really work?
Put your data to work to reap higher margins
Many OEMs generate data from a range of systems, including remote terminal units (RTU), supervisory control and data acquisition (SCADA), radio frequency identification (RFID), automated guided vehicle integration (AGV), programmable logic controllers (PLC), customer relationship management (CRM), as well as any number of IoT devices. To reap the benefits of a connected aftermarket services program, you’ll need systems that can integrate customer and product data, supply chain information, analytics, case management, and customer service operations – regardless of the legacy system in which that data resides.
Using cloud technology is one approach to connecting all your data and making it available in real time. Positioning intelligence and process automation capabilities in the center of your tech stack is also critical. It helps streamline connections to data and analytical models and makes it possible to orchestrate processes and communicate up through channels with consistency.
Leading manufacturers are connecting to customers and getting real results
Automotive OEMs such as General Motors are demonstrating how connected aftermarket services provide value. For example, GM’s OnStar operations uses a centralized, automated decisioning solution to help understand the context of each customer’s inquiry and quickly initiate the most relevant action and/or response.
A global manufacturer of agricultural and construction equipment is using machine telematics to proactively track the health of thousands of pieces of equipment and automatically deploy adjustments when needed. Through their aftermarket services program they are reducing maintenance costs for equipment in the field and helping prevent their customers from experiencing unplanned downtime.
Wärtsilä, a Finnish manufacturer of energy and marine solutions that also services power sources and equipment, is using a cloud-based data lake to collect and normalize data from thousands of sensors on equipment installed around the world. It feeds this data into their Pega-based global IoT solution for analysis to preemptively identify areas of lower performance or potential failure.
These manufacturers are simplifying complexity, building a better understanding of their customers’ needs, and creating new opportunities for growth through investments in real-time data, analytics, centralized intelligence, and intelligent process automation – starting with one aftersales customer or product user journey at a time.
Where can you put your data to work to connect with customers and boost your bottom line?