Servitization: A contract manufacturer’s journey

Posted on 3 Apr 2018 by The Manufacturer

As a manufacturing service provider, G&B is seeing rising demand for servitization to create a more productive & lean supply chain strategy for its clients.

Laura McBrown discusses some key points G&B Electronic Designs Ltd has learnt as it offered servitization to its clients, and added value to its core manufacturing business.

Servitization - G&B is a contract manufacturer of printed circuit board assemblies and electronic products with a 35-year pedigree - image courtesy of G&B Electronic Designs.
G&B is a contract manufacturer of printed circuit board assemblies and electronic products with a 35-year pedigree – image courtesy of G&B Electronic Designs.

For centuries, traditional manufacturing simply involved making products and then selling them. It’s a straightforward business model, but with the rise of digitalisation there is now a whole host of new revenue opportunities beyond ‘just’ product sales for forward-thinking manufacturing businesses.

Likewise, for companies that commission external manufacturers there are plenty of ways to simplify and streamline a supply chain.

G&B Electronic Designs Ltd is a contract manufacturer of printed circuit board assemblies and electronic products with a 35-year pedigree.

As a manufacturing service provider we are seeing an increasing demand for ‘servitization’ to create a more productive and lean supply chain strategy for our customers.

Focus on core activities

Our servitization journey started with one of our medical customers, Lifelines, whose core activities are developing, marketing and selling sophisticated medical products.

To focus on these core activities, Lifelines wanted to truly outsource their manufacturing-related supply chain activities.

They needed a partner who could take on peripheral tasks related to manufacturing and distribution; for example, holding their stock, configuring devices to the end-user requirements, managing a comprehensive range of product accessories (often one unit is packed with up to 25 accessories) and finally, ensuring that products are sent in the correct packaging with branded paperwork.

This article first appeared in the March issue of The Manufacturer magazine. To subscribe, please click here.

In addition to these manufacturing and distribution requirements, Lifelines have post-sales servicing needs, which must be managed, along with all the paperwork necessary for regulatory compliance, complaint handling and trend analysis.

By working closely with Lifelines and developing systems, we delivered a solution that means our client never needs to see or touch a product – we manufacture it, package it and ship it with Lifelines paperwork straight to the end-user.

G&B's manual assembly workshop.
G&B’s manual assembly workshop – image courtesy of G&B Electronic Designs.

We also manage the servicing of rented or sold products and cover any issues that the end user has with the product. No matter the age, they come straight back to G&B – not via Lifelines.

This model generates a number of benefits for our customer – for example, they don’t need a storage location or a stores team, nor do they need an inspection department, IPC-certified staff or an ESD-controlled and audited area.

Furthermore, they don’t have to manage the quality control of accessories, nor they do not pay for shipping between us, as their supplier, and their facility, which saves a journey and also has a positive environmental benefit.

Their engineers aren’t tied up fault-finding customer returns or product failures, and their products reach end users faster.

Since developing this service-based relationship with Lifelines, much of our new business has been driven by this attractive approach to servitization – in fact, we can even offer a database solution to control the whole process.

The next step, for customers and manufacturers

If you are thinking about the benefits of servitization and looking for manufacturing solutions that could benefit your business, then I recommend analysing the following key points:

1. Which of your products/product ranges could suit this model?

2. What additional regulatory requirements will you or your manufacturing partner need to comply with?

3. Controlling stock from an accounting perspective – your supplier will need to invoice you so you can ship and invoice to your customer. How is this going to be managed from their site?

4. Who is insuring the stock? It could very well be cheaper to add a manufacturer as a location to your insurance rather than take on theirs.

5. What will your database solution to control this process look like and how will this be maintained?

6. How are you going to ensure that the necessary paperwork, branded as your company, ships with the goods; do you have specific couriers for particular customers that must be used, and how will this be controlled?

7. What level of serial number traceability do you need to maintain?

8. How are bespoke packaging and accessory stock levels going to be managed?

9. What reports will you require for your accounting and admin teams?

10. What additional stock needs to be held for ongoing servicing and repair?

11. How much space is going to be required at your manufacturing partner?

There are also some general points that you need to bear in mind:

1. Don’t kick off all in one go. Make servitization transition a staged process; inevitably there will be local knowledge that will come to light and which needs to be factored into a steady, planned transfer.

2. Don’t rush – getting the accounting and database logistics set up and tested may involve many stakeholders, so allow sufficient time for proper validation of systems and processes.

3. Don’t expect extra payment terms. There are many benefits to the servitization model, but not paying for the product until it ships to your end customer may not be one of them.

All of the above issues and questions can be answered with the right partner. Many manufacturers working in your product space will have solutions available for you to choose from – what you really need to check is that you have your systems well prepared with a robust data pack and clear numbering systems that control all your  and accessories.

The client’s perspective

“Lifelines Ltd is a company that designs and develops complex electronic medical diagnostic equipment, which G&B then manufacture.

Together, over the past 18 years, we have built up a lean supply and support process that enables us to focus on our core business of product development and to increase our market share, secure in the knowledge that our partner is able to provide us with the support that we require.

This has enabled Lifelines to build up an installed base of many thousands of systems worldwide and become a preferred supplier of home monitoring ambulatory EEG equipment.

G&B handle our returns and RMA procedure, receiving units directly from our customers and undertaking test, repair, upgrade, recalibration and full factory refurbishment. All this is undertaken according to a strict ISO9001 and medical ISO13485 quality system within closely monitored timescales, to detailed procedures and cost targets.

In this partnership, servitization means that we can concentrate on what we’re good at, and G&B can do what they’re good at,”

David Hulin, Technical Director, Lifelines Limited.

Laura McBrown, MD, G&B Electronic Designs Ltd.Laura McBrown is managing director of G&B Electronic Designs Ltd and Ambassador for Manufacturing at the Institute of Directors, Surrey.

Laura is also a member of The Manufacturer Editorial Advisory Board and a member of The Manufacturer Top 100 – named within the 2016 report.