Making sense of the servitization shift

Posted on 20 Oct 2016 by The Manufacturer

Servitization is a hot topic for manufacturers as they take on the Industry 4.0 challenge, but once you get past the hype, what does ‘servitization’ really mean? Richard Fernandes reports.

In simple terms, servitization offers the opportunity to create new business models while building meaningful and long-lasting customer relationships.

Richard Fernandes, head of Aerospace and Defence, Atos.
Richard Fernandes, director of Aerospace, Atos.

Recent well-publicised examples include John Deere’s ‘Agricultural Outcomes’ and Rolls-Royce’s ‘Power by the Hour’ business models.

Sensing the change

At the heart of servitization is the convergence of multiple technologies; presenting a tremendous opportunity for those that are ready, but a significant threat to the unprepared.

Often, the servitization business case hinges on the use of sensors embedded in products. As sensor capability increases and cost per unit falls, the uptake and variety of variables being monitored has risen dramatically. The challenge is how to harness the value of captured data.

This is where discrete and process manufacturers diverge. Discrete industries typically look to embed remote operating sensors to increase data gathering capability aimed at monetising through-life maintenance, whereas high-volume process industries tend to opt for ‘tagging’ to increase end consumer product uptake.

This can range from automotive manufacturers providing ‘tyres as a service’, using data capture to replace vehicle tyres before the driver knows they need it, through to FMCG (fast-moving consumer goods) manufacturers automatically re-stocking product displays based on predictive demand.

To the cloud

Such data capture/analysis is all part of the IoT (Internet of Things) with sensor data typically communicated directly to the cloud – vastly increasing the scope of data capture and the speed of processing.

The Manufacturer and Atos recently hosted their second annual roundtable event, bringing together leaders from across industry to discuss how the UK can better embrace digital manufacturing technologies.

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This means that processes such as service management notifications or inventory updates can now be triggered in near real time, improving manufacturers agility and ability to deliver.

Platforms not databases

These cloud technologies are fast developing and transforming from old-school databases to PaaS (Platform as a Service) solutions.

IoT PaaS systems can perform valuable services that manufacturers can use for predictive analytics, tokenised security, mobility and gamifiction, on their journey to service-based business models, which in turn create valuable services and alternative revenue streams.

Beyond the theory

Alongside industry-leading partners, Atos has perfected a raft of standardised processes that, when coupled with worldwide access to system data enable manufacturers to successfully make the move to servitization.

Servitization Graphic - AtosFor example, a world-leading tyre manufacturer has selected Atos to assist with the transformation of their business model from ‘just’ selling tyres to now selling mileage.

In their new business model, rather than purchasing tyres themselves, fleet customers buy a certain amount of miles per period and receives a tyre renewal automatically when needed, with all equipment and the entire process managed by the provider.

This helps to extend revenue flows, make production and materials usage more predictable, increase customer loyalty and improve customer service.

Thanks to its long-term presence and considerable experience in manufacturing, and being at the forefront of technological developments in the sector, Atos helped their client transform their business, reduce costs and inefficiencies while increasing flexibility to make the move to servitization a success.