Aftermarket services transformation: The business of experience delivery

The transformative era of Industry 4.0 laid the groundwork for data-driven decisions. Now, as original equipment manufacturers (OEMs) test the waters of Industry 5.0, they're doubling down on maximizing product efficiency through aftermarket services transformation – a solid way to diversify from engineering products to delivering experience.

Often overlooked due to legacy business models, manufacturers are bringing aftermarket services to the front and center of innovation. And they're adding aftermarket promises to customer loyalty strategies. But what's fueling this momentum?

1. Evolving customer expectations: Steep costs of equipment ownership are driving demand for more high-touch predictive maintenance. Customers want OEMs to be hands-on partners and help them trim unplanned downtime
2. A desire for predictable and profitable revenue streams: A one-and-done approach to product sales is no longer enough, especially when you want to deliver the best to your customers by increasing an equipment's lifespan. Prioritizing aftermarket lifetime value ensures recurring revenue for OEMs and reduces reliance on one-time product sales
3. A service-led differentiator: Today's manufacturers go beyond selling products to also deliver services. This servitization of the industry opens more opportunities for a company to create its unique space in the market by streamlining remote monitoring and diagnostic operations, predictive maintenance, installed base analytics, and service contract management
4. An ESG-powered offering: Sustainable manufacturing is a strategic imperative for businesses. And it's finding its way into aftermarket services through repair and reuse protocols. Recovering value from existing equipment prolongs its life cycle and helps you meet circular strategies for more robust supply chains

Every opportunity comes with challenges. And aftermarket isn't any different. Some of the roadblocks that manufacturers face before delivering this service transformation are:

1. A lack of visibility into the installed base: Because OEMs often sell through an extended distribution channel network, they have historically struggled to gain visibility into their installed base. Disjointed data prevents access to relevant insights on the customer base, hurts customer experience, diminishes the aftermarket lifetime value of equipment, and makes on-time service contract renewals a challenge
2. Supply chain bottlenecks: Service parts availability comes with its share of complexity, as OEMs constantly struggle to prioritize between improving service level and optimizing working capital. A lack of effective spare parts planning, inventory visibility, and a disconnected ecosystem of suppliers are often the root causes of painfully long wait times. Add geopolitical disruptions to this, and you are looking at unhappy customers
3. A product-only focus: Aftermarket isn't always a core strength of manufacturers. Why? A lack of necessary skills due to a product-focused mindset. Add complex organizational structures, and you've compounded the problem. As a result, service-focused companies have been filling in the aftermarket services gap and biting into market share
4. Too many solutions on the market: Not all partners bring the necessary know-how related to products, processes, the long-term impact of adding new service parts, and more. Buyers really have to do their homework on which solutions and service partners will deliver the ROI they need. One wrong choice, and you're stuck with solutions and partners that can do more harm than good

The good news: these challenges are manageable. You can start by focusing on the fundamentals to drive aftermarket value.

• Design systematic initiatives to increase installed base visibility. And improve life cycle data management to find early opportunities for cross-selling and upselling. It will also help improve resource allocation and drive operational efficiency
• Move from reactive to proactive management. Advance data analytics and AI agendas across all aftermarket functions to streamline parts supply, dealership connectivity, and inventory management. Apply remote monitoring and diagnostic strategies to your aftermarket goals to anticipate equipment breakdowns and provide quick fixes
• Add diverse capabilities to scale aftermarket transformations. How? Find yourself an aftermarket ally who is willing to co-innovate, adopt new technologies, and help scale solutions quickly. In our recent study with HFS, executives emphasized the need for a diverse ecosystem, with 80% recognizing the need to transition to performance- and purpose-driven commercial models with partners to capitalize fully on the potential of generative AI (gen AI). Harnessing your network's collective AI and analytics capabilities to run sustainable, agile, and resilient operations allows easy access to best practices and industry insights that may not be available within the four walls of your company. With outcome-based KPIs, service partners effectively have skin in the game, sharing risks, resources, and accountability to drive results that benefit all participants

Terex, a global manufacturer of lifting and material processing products and services, had no real-time data on its service parts inventory. As a result, customers faced downtime delays. We worked with it to resolve supply chain problems and increase part availability through an AWS-hosted global supply chain planning solution.

Using the solution's direct-order interfaces, Terex simplified parts dispatch to meet aftermarket service opportunities and cut downtime delays. Embedding planned services into the parts planning processes, Terex reported an 80% reduction in planning efforts at dealerships and service partners. With automated processes and over 100 dealers now well-connected, the manufacturer registers over 1,000 service opportunities every month.

Manufacturers like Terex are not alone. And the demand for aftermarket services will accelerate in the future.

Businesses are already experimenting with AI to transform the aftermarket. While traditional AI and machine learning enhance OEMs' service capabilities and foster a more proactive approach to handling breakdown incidents, gen AI will add a new dimension to field services and depot repair.

But there's a catch. The ongoing need for skilled field or depot technicians will likely compound due to an aging workforce and technology advancements in the coming years. So, what's the solution? Tailored learning experiences in native languages and on-the-job assistance. This will significantly elevate technician experience and reduce time to skill, ultimately decreasing mean time to repair. This way, you can create win-win scenarios with operators benefitting from improved equipment uptime. Gen AI will serve similar value for remote monitoring and diagnostic operations, guiding operators with actionable insights in everyday, easy-to-understand languages.

With AI continuing to open doors to a new world of aftermarket possibilities, an OEM will find it easier to personalize customer experience across an equipment life cycle. And drive meaningful improvement to aftermarket lifetime value by integrating AI capabilities to predict disruptive scenarios and gauge risks. But the quickest way to start your aftermarket transformation journey is to accept that technology is only part of the solution. You need the right people to shoulder your initiatives to reach the finish line of delivering customer-wowing impact.