Service 4.0: How Do Manufacturers Successfully Manage the Service Transformation?

Why is Service 4.0 relevant for mechanical engineering?

Companies in the mechanical and plant engineering sector need to build resilience in order to navigate safely through times of crisis. No easy task - the number of challenges is growing, costs are rising, and developments such as demographic change and digitization have to be incorporated into planning, as do changing customer requirements. 

Those who want to remain liquid and continue to grow must set the course now. The best opportunity to remain competitive in the long term is the transformation from product to solution provider. The goal is Service 4.0.

Definition of Service 4.0

Analogous to the industry, which is undergoing the fourth industrial revolution driven by digitization, service in mechanical and plant engineering is also changing. Service 4.0 stands for digital technologies such as the Industrial Internet of Things and new services such as predictive maintenance, which go beyond the previous range of aftersales and sales activities. This is also referred to as "servitization". 

At its core, this is about digitizing aftersales, networking data, and creating new business models.

5 Advantages of Service 4.0

Many machine builders have already recognized the potential inherent in the next evolutionary stage of the service business. These are the five most important benefits:

1. New revenue streams and high operating margins to compensate for volatile new machine business 
2. Possibility of differentiation in national and international competition
3. Like Customer Service in the B2C sector, Service 4.0 strengthens customer relationships - for example, by offering machines, spare parts, and knowledge in an integrated manner, as well as seamless service.
4. Increased efficiency in after-sales and related departments through networked service processes and data 
5. Reliable planning through subscription models or positioning as the customer's service partner

Manufacturing companies also benefit: For example, if service and spare parts data is available to them digitally and networked, and if it is linked to the manufacturer's online store, plant operators can optimize their spare parts storage and reduce the risk of machine downtime.

Overview: The four service levels in mechanical and plant engineering.

Service 4.0 is the goal - but what does the path to it look like? The following overview summarizes the evolutionary stages from Service 1.0 to 4.0. 

Service 1.0: Sales support

At the first service level, the deployment of service technicians, availability by telephone and the delivery of spare parts fulfill a support function for the sales department. Its core business is the sale of new machines. The service focus is primarily on solving problems.

Advantages

• Lean structures
• Low service effort for manufacturers

Disadvantages

• No additional sales potential
• Little overview of machine and system usage
• No added value for customers
• Unnetworked data increases the effort required to search for service information.

Service 2.0: Product-related service

Companies in Service 2.0 offer a wide range of services for sold machines and use digital technologies to do so. These include training videos for service technicians and customers, remote services or upgrades for sold machines and systems. 

Advantages

• Revenue sources beyond sales
• Stronger customer loyalty

Disadvantages

• Only rudimentary networking of data
• Therefore, risk of incorrect orders for spare parts
• Higher effort for manufacturers

Service 3.0: Networked service

Manufacturers at the third level sell a package comprising machine and service, thus strengthening customer loyalty in the long term. They use operating data from their products to better predict maintenance and increase efficiency, for example. The tools used and the resulting knowledge about data and interrelationships form the basis for the next service level. 

Advantages

• High added value for customers
• More efficient processes for manufacturers and producers
• Mechanical engineering and customers move closer together
• Machines and systems become more intelligent
• Predictive maintenance becomes possible

Disadvantages

• High effort for manufacturers who use inappropriate tools
• Requires cooperation and networking of various departments

Service 4.0: 360° service

Companies with a Service 4.0 offer their service as a separate product. Thanks to digitized aftersales processes and the networking of data from operations and the company itself, new business models are emerging that result in a 360° service platform. 

Advantages

• Unique selling proposition 
• Basis for new business models
• High margins 
• Long-term customer loyalty
• Up- and cross-selling potentials
• Flexibility in implementing new trends

Disadvantage

• Can only be built up with the right tools

How do companies reach the next service level?

An assessment of the current situation is the first step on the road to Service 4.0: an analysis of the current state of your service business shows which service level your company is currently at. This orientation helps you to plan and prioritize concrete steps. After all, the service transformation should be carried out iteratively and with realistic targets so as not to disrupt ongoing operations.

The following points are also important:

• To benefit from Service 4.0, investments in new technologies are necessary.
• The transformation of the service offering requires processes to be questioned and, if necessary, relaunched.
• Servitization is a joint task that must be tackled not only by aftersales and sales, but by the entire company.
• The focus must always be on the needs of the customer. This increases the acceptance of new business models and helps companies to upgrade their service offerings in a targeted manner.
• Servitization is a process that does not end with the introduction of a new tool. Companies must remain open to new service trends and technologies.

What role does a spare parts catalog system play in servitization? 

Surveys show: The average share of sales accounted for by the service business is currently 20 to 30% in the mechanical engineering sector. Large players are already aiming for the 50% mark. But more and more medium-sized companies are also taking up the cause of service transformation. Thanks to digitization, they have the necessary software tools at their disposal.

One key to Service 4.0 is a spare parts catalog system. The digital spare parts catalog can be expanded into an all-in-one service information system using software such as Quanos SIS.one. It bundles parts information in a user-friendly interface and offers significant added value to maintainers, service technicians, support staff and customers.

The next evolutionary step is the Digital Information Twin - a central platform where technical and service information about machinery and equipment is stored, smartly networked and synchronized with its real state. This can be easily and smartly implemented with Quanos InfoTwin, the new modular cloud solution from Quanos. 

In the future, you will be able to offer services such as predictive maintenance with the technical setup from Quanos - in line with Service 4.0. Start now with the digital spare parts catalog to optimize your service processes or expand your setup to the Digital Information Twin. In this way, you can achieve your Service 4.0 goal step by step.