The Surprising Truth About Aftersales & Service
New UPS® research highlights the untapped potential of aftersales to help manufacturers differentiate and grow.
Aftersales, or afterthought?
One-third of middle-market industrial machinery manufacturers say that up to 75% of their profitability comes from parts, service and consumables, and over two-thirds say their customers’ expectations for aftersales services are rising. However, only 12% consider aftersales and service important differentiators for their businesses. These findings from a survey UPS conducted in collaboration with independent research firm IDC (www.idc.com), imply that industrial aftersales offers an untapped potential for most manufacturers. Yet the barriers are steep since most surveyed felt their customers are more concerned with the quality and performance of the machinery.
What is your top competitive point of differentiation for all of the machines that you sell?:
- 45% Machine performance
- 43% Machine quality
- 12% Aftersales service
At the same time, manufacturers must weigh the long-term risks of falling short on their demanding service-level agreements for increasingly complex products. And as their customers become leaner and expand into new markets, aftersales support grows more crucial to the relationship. In short, manufacturers searching for growth should consider aftersales excellence as an engine for growth and differentiation.
Offsetting the limitations of lifecycle
With the average life of machines reported to fall between 10 to 30 years, a natural limitation on the opportunity for new sales exists. Pair that with the growing demand for aftersales support and the opportunity seems clear.
What is the average lifetime of your machines/equipment?:
- 61% 10 to 19 years
- 18% 20 to 29 years
- 11% Less than 10 years
- 9% 30 to 39 years
- 1% 40 or more years
While the benefits of enhancing service levels seem obvious, the challenges can be intimidating. The majority of manufacturers surveyed sell broadly across multiple industry segments, from multiple facilities to locations around the world.
Which of the following best describes how your company targets industry sales?:
- 64% We sell broadly across all industry segments
- 26% We mainly target one industry
- 10% We sell to a select number (2-5) of industries
Add an average six-month service cycle and a service network can take on the look of a global spider web.
Which of the following best reflects how often your machines/ equipment are serviced?:
- 47% Every 6 months
- 27% Annually
- 26% Every month
How well are original equipment manufacturers meeting their customers’ service needs? Given the potential for millions in lost productivity and revenue, even 72 hours is likely unacceptable. Downtime creates long memories, and with fast-changing technologies and trade agreements opening the field to new competitors, anything less than immediate service can dim the prospects for a repeat equipment sale. This is especially problematic with the long capital purchase cycles for machinery.
Which of the following best reflects the typical response time for new parts or machine repair?:
- 60% 2-3 days
- 21% 1 week
- 14% 1 day
- 5% 1 month
Risks vs. rewards of investment
The expense and financial risks of building or buying a service organization is daunting for anyone in this fickle global economy. That may be why 44% of those surveyed are currently working with 3PLs to provide service and support, or plan to start. They are likely tapping into the 3PL’s established aftersales infrastructure to reduce or eliminate capital outlay and gain speed to market.
Still, in-house management of service and support remains the primary model used by the majority of respondents (56%), with no plans to change.
Machinery makers have a long tradition of engineering high-performance products for discerning customers. But with the increasing complexity of industrial machinery comes a growing, often contractual, need for timely maintenance and repair. Are machinery manufacturers focusing enough on the aftersales side of their businesses? Research suggests the answer is probably not. Managing spares, maintenance schedules and service are considered a cost of doing business for those who feel their customers are more interested in having the highest performing, most innovative and productive machinery around. But in the face of global competition, and a long product lifecycle, manufacturers should take a harder look at the aftersales as untapped potential for differentiation and growth.
For a complete overview, download the full summary below.Download The Executive Summary