Made In The Midlands


The basic business model for many factories mean they are not sustainable


Feature


endangered species? Are our factories an


By Terri Hiskey (pictured), vice president, global product marketing for manufacturing at Epicor Software


There is no doubt that the manufacturing landscape is tricky to navigate. The cost base for manufactures is at an all-time high, international competition has never been more acute and production operations have never been easier to transfer overseas. With the rate of


change accelerating fast, the outlook for manufacturing is far from rosy. The basic business model for large numbers of factories up and down the country can’t be sustainable in the long term. Yes, there will always be some


products that will be made locally, such as items that are produced in low numbers, items with a short shelf life, (such as pre-packed sandwiches) heavy items such as bricks and those that need to be changed quickly to adapt to market needs. However, in general, if businesses


want to continue to manufacture products in our country, then they need to think long and hard about how they can do this whilst building revenue, staying competitive and continuing to prosper as a business. Many manufacturers rely on their technical expertise to keep them at


the bleeding edge of innovation. Others do everything they can to provide a higher quality product. These companies can often stay one step ahead of their competition, but this is not always possible for everyone. Is there another way? Yes there is. It is


called servitisation and it could possibly revolutionise manufacturing, not just in the UK, but


worldwide. The idea of


manufacturers providing


services is not new. At a basic level, manufacturers have been supporting their product offering with spare parts for generations. The next step in the servitisation model is to offer intermediate services such as a helpdesk, periodic maintenance, repair and overhaul. Again, many of these are


standard fare and have been for a long time, even so these intermediate services present a fantastic opportunity for businesses to strengthen relationships with their customers, and provide ways to generate additional revenue streams for the business. But it is with advanced services


where the opportunity for business growth is even greater.


Servitisation could revolutionise manufacturing


With an advanced service


offering the customer receives an outcome, or capability, rather than purchasing a product. For example, an office manager might sign up for the provision of ‘document management solutions’ rather than buying a photocopier. Similarly, an airline might enter


into an agreement for a number of flying hours rather than ordering a jet engine. In northern Europe, consumers have already been offered a 'pay per wash' option as part of a trial run by their domestic washing machine manufacturer, and this trend will surely continue. The advantages with these


advanced services are numerous for both customer and producer; the customer benefits from a ‘pay- per-use’ model rather than spending a large amount of cash up front.


The customer also benefits from


a guaranteed product performance as well as commitments regarding product development and enhancements over time. In return the customer agrees to


a longer-term contract over several years and a stronger partnership between manufacturer and customer is formed, which improves cash flow and customer lifetime value. The manufacturer, instead of selling products is now in the business of selling outcomes, bundling together a range of products and services tailored to individual customer’s requirements. If carried out correctly, the


business transformation through servitisation should allow for a new lease of life for manufacturers up and down the country. Who said our factories were an endangered species?


July/August 2018 CHAMBERLINK 57


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