Will the use of SLM software spread to metals makers?
First published in American Metals Market in May, 2016
Will the use of SLM software spread to metals makers?
In a world in which manufacturing and office functions are increasingly codependent, the rise of Enterprise Resource Planning systems (ERPs) provides an umbrella view of all key production and support activities factoring into a successful metals company.
But the advent of Service Lifecycle Management (SLM) software is also gaining steam, particularly with metal-consuming original equipment manufacturers (OEMs) such as aerospace, oil and gas, automotive and others. However, the distinguishing characteristic in migrating toward SLM software is the after-the-sale service component that, as of now, is outside the realm of most metals companies.
SLM software can change the way a service organization analyzes, plans and executes equipment maintenance to ensure the steady performance of its products for the end-user. These services range from improving the first-time fix-rate of field technicians to providing the parts and consumables required to keep the equipment running and avoiding downtime. SLM software allows companies to begin optimizing and ultimately transforming the way service is offered and delivered, moving from reactive break-fix scenarios to predictive, condition-based services. With the emergence of the Internet of Things (IoT), manufacturers and their customers are both interacting with products in new ways. Connected products have become the sensors for a customers’ service experience. SLM software is maturing to capture this trend, with capabilities that include employing remote connectivity and using real-time data to deliver predictive and proactive solutions.
SLM software has enabled the transformation of service operations from cost centers to revenue generators and allows companies to differentiate themselves by offering “service as a product” business models. “To be truly most effective, a service organization needs to be able to integrate information from across the enterprise and the operational and performance data from its install base,” according to John Carrington, vice president of SLM market strategy for PTC, a leading software provider based in Needham, Mass. Thus far, the use of SLM software by metals companies has been limited at best. “Steel is basically a commodity,” Bob Consani, president of Michigan Information Systems (MIS), Northville, Mich., said. “If the material doesn’t perform in the field, you fix the problem. But if it does perform as intended, you lose track of it once it goes out the door. Therefore, SLM may not apply to steel.”
Germany-based SAP SE’s Stefan Koch, global metals practice leader, agrees that as a commodity, there is little—right now—to track with steel. But that could change if metals companies learn to differentiate themselves through services. “The material may be a commodity but there may be ways to ‘track and trace’ the material in use to offer service, more information about the product performance and how to work with it and maintain it once it is sold. Metals service centers, in particular, can differentiate themselves with after-sales services.”
SLM software provider PTC believes that while there is little use of SLM software in the steel industry today, there should be recognition of its value to the myriad OEM metal-consuming industries that have embraced the software. “SLM software is a valuable tool for aerospace, for example, in enterprise and asset management. The oil and gas industry, both producers and those who service them, are using SLM in plant and asset maintenance,” Carrington said. “SLM software is a valuable tool to manage the maintenance and lifecycle of a large number of assets. We also are discussing its applicability with the mining industry as well. But for now, product lifecycle management (PLM) software, which has a manufacturing asset perspective, remains the critical repository of information for steel.” Although there is currently little application of SLM software by steel and aluminum companies today, PTC’s Carrington believes it could be a very effective tool “to help metals companies differentiate themselves from their competition.”
Today’s metals producers and service centers rely primarily on customer relationship management (CRM) and PLM software to manage many of the production and office support functions for steel and aluminum products. The layering of PLM and SLM components within the existing ERP architecture allows a metals service center to “collect and track data points that identify incremental revenue opportunities to turn quotes into sales. Our ERP is already tracking what new things the customer wants with analytical tools. The trick is getting the salient data points,” MIS’ Consani said.
Accenture PLC’s Andrew Zoryk, managing director and enterprise business services lead, chemicals and natural resources, based in Germany, has seen an “uptick in the past five to eight years toward CRM software to help producers better understand how the customer is using the steel and to be relevant in the marketplace” to stave off the competition of low-priced steel from throughout the world.
But metals companies can capture and provide more value and more services by further developing more complex and innovative products. “As product complexity increases, so should the amount of services offered. Advanced steels help further differentiate producers and can lead to the sale of products and solutions, which would move metal makers closer to realizing the value that can be gained through SLM software,” Zoryk said.
The development and production of advanced complex products could further prompt metals companies to recast themselves as providers of design services, believes both Accenture’s Zoryk and SAP’s Koch. As a product-focused industry, metals companies should start looking at their products as holding the potential to provide services. According to Koch, “You need to ask, ‘Do we concentrate today on sales of products or do we want to increase potential sales tomorrow by offering a service as well?’” He points to the example of a steel beam that will factor into a bridge and all the additional services that will be layered onto that beam—fabricating, welding, long-term maintenance such as painting and periodic inspection—that could be managed and/or provided by the metals producer or distributor.
Zoryk can see metals companies developing into providers that embrace the entire life of the product. “They should consider selling products along with solutions. For example, consider positioning your company as a supplier of construction and design services such as structural concepts and usingskills within the company to advise on the technical aspects of the steel.”
The concept of total lifecycle management is being advocated by the World Steel Association and is receiving considerable attention in Europe, according to Koch. Dubbed the “circular economy,” the concept moves from a linear economy to one governed by the principles of reduce, reuse, remanufacture and recycle. Instead of manufacturing from raw materials and then disposing of the product at the end of its lifecycle, the circular model optimizes resource efficiency while ensuring that the value of a product is maintained during its useful life.
In the circular economy, products will need to be durable, easy to repair and ultimately recycled. “The impacts on the environment will be significantly reduced, and there will be far less use of finite natural resources. But the circular economy will necessitate the development of new lightweight products that will produce value for both the producer as the product matures and then eventually is returned to be made again. The development of new products for the circular economy will in fact provide more opportunities for after-sale service than most products available today,” Koch explained.
Until there is the adoption of the circular economy or something comparable, metals companies will be looking to create more value.
Michigan Information Systems sees software providers increasingly incorporating SLM features into their newer-version ERPs. And Accenture envisions shortened product development cycles in steel aided by software including PLM, CRM and SLM. “If it takes you five years to create a new product and your competitor can launch it in three years, you’ll buy the one first to be offered. But by using CRM and SLM software, you can better determine your product development priorities and shorten your development cycles while reaping value,” Accenture’s Zoryk said.
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