Projected impact: Moderate
Timeframe: Already here
In supply chains, value of goods and products increase as they approach the final consumer. Servitization is when a company combines a product with bundled services to create a more comprehensive offering to the market. It can take several forms, from added services like installation at delivery or recycling of old products to complete functional responisbility where the customer pays for usage instead of for the product. In the film below, servitization is explained:
In the domain of freight transportation, the effects of servitization can be noticed in several ways.
- The Transportation company´s supply of transport services, some signs of servitization:
- Sharing operational information like ETA, goods state, emissions etc.
- Sharing tactical information like plans, schedules etc.
- Sharing strategic information like market projections, planned offerings (e.g. new shipping lines) etc.
- Bundled services like installation, waste removal, packaging removal, education in usage, sorting, kitting, returns handling etc.
- The Transportation company´s demand for vehicles and resources etc., some signs of servitization:
- “Power-by-the-hour” – Instead of buying the truck, the haulier pays for uptime
- Usage of 3:rd party logistics services to rent storage space etc.
- Usage of matchmaking services to outsource some of the planning activities
- The Manufacturing company, some signs of servitization:
- Selling functions instead of products, e.g. a customer paying for printed copies instead of the copying machine.
- Adding aftermarket services like periodic maintenance or product support etc.
- Selling subscriptions instead of products like cloud based hosting service that charges by month
Supply chains containing bundled services or subscription type models are more complex than the traditional, clear-cut customer-supplier relationships. A manufacturer might well be the owner of the product that is shipped, long after the physical delivery, for instance.
For the domain of AEOLIX, servitization brings increased demands on trusted data sharing, preferably in real-time as well as increased complexity in designing interoperability platforms.
Examples from industry
Power by the hour at Rolls-Royce:
Tim, B. and W. L. Howard (2013). “Servitization of the manufacturing firm: Exploring the operations practices and technologies that deliver advanced services.” International Journal of Operations & Production Management 34(1): 2-35.