February 14, 2017

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IoT a catalyst for revenue in aftermarket service

With the sales of new equipment heading down hill and competition building companies are looking for new way to increase their revenue and customer loyalty. Aftermarket service is in focus to address the revenue, profitability challenges leading to a whole world of innovation.

According to ABI research Revenues from maintenance, analytics will see a CAGR of 22% and the market size will reach $ 24.7 Billion by 2019 driven primarily by predictive analytics and M2M connectivity. By 2019 they will collectively represent 60% of the revenue.

As aware the profitability through services has always had a higher contribution to company’s profit which is close to 45% which further emphasizes the need for better service scalability. Connected assets acts as a key enabler to monitor, control & optimize services throughout the value chain.

Connected Assets Enables -

  1. Remote service - this provides a rapid ROI without immediately changing the entire value chain. Products are enhanced with sensors to monitor health & performance and provide much needed asset information to customer service agents and field technicians. This helps in delivering an accurate solution at a faster rate and reducing the equipment downtime thereby increasing the customer loyalty. A chance to further upsell/cross-sell acts as an additional revenue generation stream by knowing the composition of the current equipment and its performance against standard expected metrics.
  2. Analytics through connected systems - helps make informed data-driven decisions which includes
    • Predictive maintenance – including service visits, potential failure, alerts
    • Real-time information on product usage
    • Scope for business optimization – an opportunity to integrate business systems is made possible through IoT. Specific services can be offered or billed according to the available real-time data and can help in automating processes like parts ordering, warranty claim management , customer support, asset tracking and fleet management. An integration of these business process will see an additional value add to the customer towards operational efficiency.
    • An ability to transform customer experience – additional product value can be enhanced quickly and at a lower cost through software upgrade of the connected systems. Additional product value can be enhanced at quicker and lower cost through software upgrades which can focus on the usability thereby increasing the shelf life of the product.

Immediate revenue benefits with connected systems for aftermarket service can be seen in the following business areas –

  • Reduce Warranty costs –
    • Arrest false claims – the operating conditions could be monitored to help establish genuine warranty claims
    • Improve design – Manufacturers can get better insight into the performance of the equipment thereby bringing in better features and functionalities with quicker and better design
    • Reduce inventory costs – with insight into potential failures manufacturers can better plan their inventory levels and increase sales of their high margin parts
    • Reduce service cost – by equipping the field technician with information on the equipment configuration, performance, usage, etc he/she can provide better service enhancing
    • Higher first-time fix rate
    • Enable remote servicing – decreasing unplanned equipment downtime and reducing travel cost

Manufacturers can now harness technology to improve the gains of aftermarket services and profitability as be a true differentiator through IoT. The capability of converting data into right information can act as a competitive edge for quick decision-making capabilities and increase customer loyalty through proactive insight based engagement