3 Top reasons for machine suppliers and distributors to expand after-sales service

Today, comprehensive after-sales services form a significant part of the value chain and are considered one of the most important competitive advantages for machine manufacturers and distributors. In Germany, the share of services in the gross domestic product has already risen to 70 percent. In an international comparison, however, Germany is only in the middle of the pack. Countries such as the USA, Great Britain or Sweden have a significantly higher share of services in GDP. In the future, the competitive conditions for machine suppliers and distributors and especially for OEMs will become even tougher. Expanding after-sales services in mechanical engineering can help them respond to this.  These are the three main reasons – and the appropriate solutions.

Those who think only of repairs when it comes to after-sales services are not thinking far enough. In mechanical engineering in particular, the range of service offerings is broad, from inspections and maintenance to spare parts management, customer training and technical support – and in some cases far beyond. By changing the business model away from a pure product and towards a service company, so-called servitisation, machine builders can significantly increase their sales and profits and thereby significantly strengthen their competitive position.

What is servitisation? Find out more here!

Why does it make sense for machine suppliers to expand their after-sales services?

• Competitive advantage

Machine manufacturers and suppliers can differentiate themselves from their competitors by providing a high level of service and thus offer real added value. For many customers, outstanding service offers a clear buying decision. 

• Increased customer loyalty

This leads to a stronger bond between supplier and customer. Loyalty and fidelity are strong success factors in a market that is rapidly changing and highly competitive

• Enhanced profitability

  
  Expanding the after-sales services has a major economic impact. This is due in particular to
  
  · New, recurring revenue streams
  Through service contracts with a long term, regular revenues from services such as maintenance are firmly agreed. Pure user contracts that include all related services are also conceivable.
  
  · Higher revenues
  Services that add value for customers also impact on profits. In its above-mentioned study, McKinsey cites examples where bundled offerings and new services have resulted in revenue increases of 20 per cent. In addition, there was a 30 per cent increase in long-term contracts. 
  
  · Cost savings
  Customers today are more cost-conscious than ever before. Service packages offer them new savings potential – on the one hand through standardised solutions, but also by extending the life cycles of their machinery. In addition, there is the reduction of unplanned downtimes and the relief of their own employees. 

“The average profit margin before interest and taxes (EBIT) for aftermarket services is 25 per cent. For the sale of new machines, it is only 10 per cent.“

– Source: Industrial aftermarket services: Growing the core

How can the expansion of after-sales services be implemented?

The advantages of an excellent service business are clear. But how can manufacturers further improve their service? A first step is the introduction of a digital service platform. By using a digital platform, manufacturers can offer their customers an even better and more personalised service. 

Such platforms offer an easier way to keep track of the different services and to react immediately to any problems. In addition, customers can immediately see which services are relevant to them and which are not. In this way, they can put together their service package individually and thus secure the perfect service for their needs. 

The Berlin-based, globally operating company Makula has developed a platform that enables mechanical engineering companies and distributors to do all this from a single source. The functions range from an automated ticketing system to a comprehensive machine resource management system that digitally maps the complete life cycle of a machine. 

OEMs in particular benefit from this. They often lack the digital competence to build such platforms on their own. Makula takes this task off their shoulders. They don’t even have to change their entire IT: Makula is compatible with more than 300 common ERP and CRM solutions, including Salesforce, SAP and Hubspot, and can be easily integrated.

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