Why has servitisation emerged as an operations strategy?

There are a number of reasons why manufacturers have adopted servitisation over the last two decades. The introduction of just-in time principles required component suppliers to become much more involved with their customers’ operations. In some cases this has meant they have taken over responsibility for some aspects of a customer’s business, such as ordering and inventory management.

Second, contracts between suppliers and customers have become more performance-based. In such outcome-based contracts, suppliers are rewarded for the results that they deliver, which makes them much more interested in managing aspects of down stream activity.

Third, product life cycles are longer due to the durability of modern materials and better quality manufacture in the first instance. This means that products require service and support for longer periods of time.

Another factor is competition.   The constant pressure of competition has driven manufacturers to become more innovative in their product and service offerings.

Fifth, emerging and novel technologies , such as satellite tracking and RFUD tags, have introduced new possibilities and enabled changes in the nature and style of service and support.

Finally, globalisation has forced the pace of change. Yesterday’s low-cost production locations become tomorrow’s developed economies, so that established firms have to think of new ways of competing, on more than just cost.

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