2020 Servitization Predictions by IFS More Relevant than Ever
May 26, 2020
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January 14, 2021
ERP software and advanced analytics are among the top 5 technology considerations for Aerospace and Defense companies as they pursue servitization.
Historically, the concept of a “service plan” for equipment that was to be launched into space or used on the battlefield would sound outrageous. However, with technological advancement – namely that of digital sensors and the internet of things (IoT) –the landscape has changed and a strategy of servitization now holds greater potential for aerospace and defense (A&D) contractors. In an article published last year by Aerospace Manufacturing & Design, the author identified a number of industry specific challenges faced by the A&D sector.
In an article published last year by Aerospace Manufacturing & Design, the author identified a number of industry specific challenges faced by the A&D sector. For example, in most industries the model of selling a product along with a maintenance and repair service contract is quite logical. But let’s consider a company that manufactures helicopter parts. Who is liable if the part fails vs. whether it was damaged in transport or in regular training exercises.
Within A&D, the servitization model often presents as a performance-based logistics (PLB) tracking system that indicates when the asset is well-serviced and available. Customers pay for the availability rather than the contractor merely selling a part or asset. Now consider this PBL servitization concept in terms of risk when the contractor supplies tanks, military aircraft, or other similar equipment that is used under harsh conditions.
Why Should A&D Care About Servitization?
Today’s tech savvy customers expect more than just a great product. They want a production “experience”. Following this path can lead to greater corporate financial stability. Long-term contracts can translate into more secure revenue streams. A higher rate of customer retention is another key benefit. Through maintenance and service contracts, A&D companies stay in closer contact with existing customers and develop an ongoing relationship. It is always more cost effective to resell or upsell an existing customer as opposed attracting and contracting with a brand-new customer.
If you are an executive, or a decision maker, with aerospace and defense sector, we highly recommend reading the full article mentioned above because it presents a number of important questions to ask when pursuing a servitization model. In summary, the main factors include:
- Who assumes what risk?
- How to handle aging equipment risk?
- Who owns the data?
- The need for professional grade cybersecurity
5 Critical Factors for the Future of Servitization
The author concludes that technology we be a differentiator for A&D companies that experience success. His top five technologies that will play a critical role in designing a servitization-based ecosystem are:
- Enterprise Resource Planning (ERP) software
- Equipment and Environmental Sensors
- IoT/Cloud deployment
- Cybersecurity
- Advanced Analytics
At RutterKey, our expert ERP consultants have seen first-hand aerospace & defense contractors experience this level of value, control and visibility of analytics and system data when they put their trust in IFS Apps. Contact us for more details.
