Industrial Machinery: Leveraging Networks To Serve A Market Of One
Originally published at http://blogs.sap.com/innovation/industries/david-parrish-blog-01255445
Companies in the industrial machinery and components (IM&C) industry can have a hard time differentiating themselves in the marketplace. They’ve applied lean manufacturing, just-in-time inventory, enterprise systems, and other strategies to squeeze every ounce of cost out of their processes. Supreme efficiency has become table stakes.
But today, customers expect more than just low cost. Yes, they still want attractive prices, high quality, and fast fulfillment. But they also increasingly demand direct contact and direct service. They want customized solutions. They want to be treated like a market of one.
That’s good news and bad news. It’s bad news because it’s harder to do, and it’s especially harder to do with the low cost and high efficiency the IM&C industry has become accustomed to. It’s good news because it gives IM&C companies new opportunities to differentiate themselves. And for the first time, the technologies exist that let IM&C leaders serve a market of one cost-effectively—if they know which technologies to leverage and how to leverage them.
IM&C companies make complex machines that can involve tens of thousands of parts. And each of their customers wants a configuration that meets their specific requirements. It’s getting to the point that, whether it’s 20 percent or 80 percent customized, there’s no such thing as an “off-the-shelf” piece of industrial machinery or specialized equipment.
What’s more, customers increasingly want direct contact and service. Rather than work with dealers or distributors, they want a direct line to the OEM for both before-the-sale configuration and after-the-sale service parts and maintenance. They’re willing to pay a premium for a single point of accountability for the machinery their businesses depend on.
Customization isn’t easy. And for many IM&C companies, direct contact and service are new territory. But new technologies are paving the way. First are the remote automated sensors and machine-to-machine (M2M) networking that make up the Internet of Things (IoT). Added to existing equipment or integrated into new components, these sensors deliver previously unavailable data streams at rapid speeds from customer sites. That positions you to deliver direct service like never before. It also allows you to quickly capture tremendous amounts of data to help improve machinery design and performance over time.
To manage that data and analyze it in real time, you need the power of in-memory computing. Only in-memory computing can accommodate both the volume and velocity of IoT data to help you sense and respond quickly enough to achieve competitive advantage.
Other necessary technologies include cloud and mobile. Making data available in the cloud lets you quickly and easily scale as appropriate. Delivering data to mobile devices in real time enables you to serve customers onsite.
That can enable game-changing new capabilities. One example is on-the-fly configuration. In the past, customizing a complex machine or system might require eight weeks of application engineers, purchasing agents, and production planners jotting down notes and manually communicating up and down the supply chain. Automating complex, highly engineered configurations with scores of options across thousands of parts was time-consuming and cost-prohibitive.
Today you can use in-memory computing to instantaneously process those data volumes, use the cloud to manage and automate complex configurations, and use mobile technology to deliver it in real time to field service technicians and manufacturing engineers at the customer site. As a result, custom configuration, price, and quote processing goes from eight weeks to eight hours, and you slash seven weeks and six days from your order-to-cash cycle—while your customer satisfaction levels go up dramatically.
On an ongoing basis, you can leverage IoT sensors to proactively service customer equipment and collaborate up and down the supply chain. That can enable new business models and strengthen customer relationships that pay dividends going forward.
From equipment to output
Leading IM&C companies are finding success by serving a market of one. An example is Joy Global, a maker of mining equipment. It’s using IoT sensors to monitor mining equipment in real time while the equipment is in operation at customer sites. The purpose is not just to gauge how it’s performing but also to predict when it will need service parts and maintenance to proactively improve machine performance over time.
The company integrates that equipment-performance data with both its shop floor and its supply chain to optimize those processes. So, for example, it can predict which spare parts to manufacture, how many to make, where to make them, and more. The payoffs are tangible: last year, Joy Global cut $100 million from its inventory. And it’s better able to meet unique customer needs.
IM&C companies have got cost down to a science. They’ve known, say, that achieving 98 percent customer-service levels will cost them X amount, while reaching 99 percent will cost them X plus too much money. But eventually all the market leaders reach the 98 percent mark, and then differentiation becomes a problem.
Today, they have the technology to cost-effectively achieve that 99 percent, or maybe even 99.5 percent. And for IM&C customers that demand to be treated like a market of one, it’s increasingly what they expect.