Originally published on 9-May-2016 | Customer Experience at http://www.digitalistmag.com/customer-experience/2016/05/09/creating-more-value-with-outcome-based-billing-and-aftermark… by Ulf Guttmann

The digital transformation of the manufacturing industry is having far-reaching effects. The Internet of Things (IoT), secure cloud computing, and hyperconnectivity offer unprecedented potential. This goes not only for product quality; it also applies to quality of service. As a result, forward-thinking industrial machinery and components companies are rethinking business strategies.

The advantage of smart equipment for manufacturing

Thanks to rapid technological advancement, equipment is now outfitted with sensors and communicators. This enables machinery to measure a wide variety of data points during operation. Then it can send that data to a server for analysis. For example, a machine system in an assembly line can record how many units it produces per hour. Using analytics, the company can determine if it can shave one or two seconds off the process. The cumulative effect of this time savings can yield thousands more units per year. It can also reduce energy costs.

Smart machines can also track levels of feedstock during the production process. Instead of humans having to check, automated systems order new materials when necessary. This has two advantages. First, supplies are always ordered on time. And second, companies don’t have to stockpile large amounts of materials. With just-in-time ordering, inventory remains low. This is beneficial for both capital and storage space. It helps keep overhead low.

Measuring production data is not the only thing smart equipment can do. One of the most important aspects is that it can calculate the real-time costs of production. The prices of raw materials and energy fluctuate. When companies integrate market data into their systems, they can make informed purchasing decisions.

Gaining a competitive edge with outcome-based billing

It’s clear that companies now have an overwhelming amount of data available to them. They can use this data to fine-tune strategies and improve products. Yet there’s another important consequence of applying this new knowledge. It enables companies to be more competitive in their offerings.

Customers aren’t so much interested in the individual parts of a business solution. What they want is an outcome that delivers value to their operation.

David Parrish, writing for Digitalist, explains how this affects suppliers. Thanks to the IoT, companies can collaborate to create holistic solutions for their customers. Instead of operating in a vacuum, they work together in a business ecosystem. This allows each company to fine-tune its offerings and pricing. Then it can coordinate with the other companies in the ecosystem. Together, they move from offering individual products to selling performance. Smart equipment can track exactly when a customer starts to use a solution. The end result is an optimized outcome that’s billed according to use.

It’s logical that suppliers that offer optimized solutions and outcome-based billing are in demand. With each company in the business ecosystem delivering its best, expertise lies at the heart of the solution. This ensures high performance for the customer. It can also reduce the scale of a customer’s core operations. This in turn can make the company leaner and more agile.

How aftermarket service strategies can add more value

Aftermarket service strategies are an integral part of service level agreements. Suppliers who fail to provide good aftermarket care risk frustrating their customers. And customers are quick to take their business elsewhere.

In a business ecosystem with many suppliers, coordination is key. It can be unclear to a customer where to go to address a concern. That’s why collaborating companies should establish their aftermarket strategy ahead of time. They should decide whether to use one or more point(s) of contact for accountability. They should also agree on procedures to handle any claims.

Of course, aftermarket care isn’t just about concerns and claims. It’s also about maintenance, upgrades, and fulfillment processes. Using smart equipment, suppliers can track exactly what kind of aftermarket service is necessary. They can create alerts so they can predict when they need to deliver this care.

Companies can provide care in a variety of ways. Contact centers can help with immediate troubleshooting, as well as the registering of complaints. Mobile field operatives can visit customers as needed to provide maintenance and repairs. Automated software upgrades can occur via the IoT. And smart systems can determine the most time- and cost-efficient way to deliver raw materials.

Enhance value chains to secure business

By enhancing their customers’ value chains, companies become an integral factor in their processes. After all, IM&C companies need to operate on as lean a budget as possible. That means they will rely on external partners to provide specific solutions. By providing integrated, effective business outcomes, suppliers become a part of an organic system. In this system, all companies are interdependent. And this goes a long way in securing business for the long term.

Visit Industrial Manufacturing. Reimagined for the new economy. to learn more about Digital Transformation for IM&C.

About Ulf Guttmann

Ulf Guttmann focuses on solution management and go-to-market for SAP’s Industrial Machinery and Components Buisness Unit. With over 26 years of SAP experience, Guttmann is well versed in the aftermarket service, enterprise asset mangement, sales, and marketing solution areas.

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