Selling capabilities, not just products, is one of three strategic approaches that can help manufacturers capitalize on the key changes transforming their market and industry. What are the other two?
Sell capabilities, not just products
Changing from a product- to a service-centred approach can boost manufacturing growth: typically manufacturers that incorporate useful services into their products realize average business growth of 5 - 10 percent a year. Imagine you were producing printers, for example. As a successful manufacturer your focus would be on selling the machine’s capabilities, not just the machine itself (“with this machine you can print 10,000 sheets per day” rather than “this machine does…”). Tying service contracts (in consumables, training, maintenance, repairs, etc.) to your product sales creates growth across the board.
In addition to that, disposing of products is now being offered as a service by a growing number of manufacturing companies. That way, the customers can always be sure that the product will be recycled in a sustainable way at the end of its life. One proof point of the strong connection between manufacturing and services is that every job in manufacturing creates another 2.5 new jobs in local goods and services and for every US $ 1 invested in manufacturing, US $ 1.37 of added value is created in other sectors.
Service contracts cement long-term customer relationships too. Seventy four percent of manufacturers said their principal motive for offering services was “closer relationships with their customer” (2015). Build your strategy around your customer’s needs, not historical requirements. Talk to them. Find out how open they are to buying contracted services, as well as just physical units. You’ll need to be sure you, and they, have the right technological platform in place, an enterprise solution that can handle the services being delivered, record and control them and schedule people (including subcontractors) to carry out and record services in the field.
First identify your problem, then your solution
Like all technologies Internet of Things (IoT) is basically a tool and it’s always better to figure out what you want to fix before deciding which tool to use. My advice to customers caught up in the ongoing hype of IoT is to focus on the problem before you start exploring solutions. Ask yourself ‘what exactly am I trying to solve?’ Write it down. Quantify it. Nine times out of 10, it comes down to “I need to make something more efficient” or “I need to save money.” Figuring out the exact time and cost savings gained from connecting machine X to machine Y allows you to calculate the investment needed and exactly what your return on investment (ROI) will be. Then is the time to ask ‘is IoT the best solution here?’ before rushing to buy extra servers, which will only end up gathering dust.
We still tend to think of IoT as something that happens “out in the field” but many manufacturers are finding that ‘smart manufacturing’ or Industry 4.0 is as effective. Smart manufacturing is a method of building greater, more effective digital interconnectedness internally, between supply and production chains, by incorporating the latest advances in sensors, robotics, big data, controllers and machine learning.
One example is an innovative German manufacturing customer of IFS’. They use the CAD System Pulsonix to create Bills of Materials (BOM) directly into IFS Applications, then showing the assembled Printed Circuit Board (PCB) whilst sending the BOM to the SMD machine. The results have made the company’s operations more cost- and time-efficient. Was this solution based on IoT? No. Did it solve their clearly identified problem efficiently, cutting costs and saving time? Yes.
Smart tech needs smart people
Emerging technologies need new talent to drive and develop them. Almost 70 percent of respondents in a survey last year saw availability of resources as the main obstacle to increasing their service portfolio, according to The Annual Manufacturing Report 2016. Over the next 10 years manufacturing will need almost 3.5 million skilled jobs but only two million of them are expected to be filled.
A combination of factors makes skills shortage a pressing problem: Baby boomer retirement, negative images of manufacturing amongst younger generations, a lack of science, technology, engineering and maths (STEM) skills, the decline of technical education programmes in many public high schools and the loss of embedded knowledge due to an increasingly mobile experienced workforce. But meanwhile technology gets ever more complex and mind-to-market product cycles shorter.
Focussing on finding, keeping and growing skills to harness new technology will be as vital as the new technology itself. Today’s modern manufacturing workers need a rich skills range -- problem-solving to, for example, autonomously adjust robots and production systems in real-time, math skills for applied competencies in measurement and spatial reasoning, technical skills for areas like metallurgy and technical system operations such as fluid power electrical controls, algorithmic and advanced computing skills to develop advanced technologies such as 3D-modelling and advanced robotics.
As product development and manufacturing systems become more interwoven and cycle times shorten, workers need to have higher levels of STEM and analytical skills to influence design changes as well as production efficiency. The good news is that technological advance tends to go hand in hand with educational advance: The more we invest in new technology, the more we learn, the more we learn, the more we learn the more new technology we create. New forms of machine-to-machine and artificial intelligence will transform our industry, but human intelligence will create and drive it.
(Antony Bourne is IFS Industry Director, Global Manufacturing)