Thursday 18th Apr 2019 - Logistics & Supply Chain

Report pin-points after-market as key to manufacturers’ profits

After-market service revenues, as a percentage of total company revenue, are set to rise by 50 per cent over the next five years, according to research conducted by Capgemini and DHL Exel Supply Chain.

After-market services include exchange, return and repair logistics for the engineering and manufacturing, and hi-tech industries. On average, manufacturing companies are already harvesting 25 per cent of their profits from this area. Putting the after-market service at the heart of the company’s product strategy has resulted in considerable investments in optimising the after-market supply chain.

More than 100 supply chain and service management executives within the engineering and manufacturing, and hi-tech industries were surveyed. Fortune 500 E&M conglomerates like ABB and Honeywell, took part in this research and the results were benchmarked against leaders in the hi-tech industry.

The large majority of E&M companies today are already experiencing profit margins between 10 and 50 per cent in service management. However, E&M companies are expecting even larger profit margins in the next five years.

Roy Lenders, global vice president for logistics and fulfilment, Capgemini, added: ‘This piece of research provides real forward-looking insight into the service logistics industry landscape. It highlights that service management is becoming a strong revenue stream for most of these large engineering and manufacturing companies, particularly on a global scale.’

‘The findings reveal that whilst the hi-tech industry is considered a front runner in service logistics developments, it is still five years behind the engineering and manufacturing industry in terms of globalisation. But the latter are encountering more difficulties in delivering consistent service and in meeting the service level expectations of their customers. While hi-tech companies are aiming to provide short response times only where necessary and moving to cost efficient service modes where possible, E&M companies are facing ever increasing business requirements. Global reach and consistency are a core focus in this industry, more than in hi-tech.’

Jacob Verhagen, vp, sales and marketing, global service logistics, DHL Exel Supply Chain, says: ‘This study reveals the extent to which our manufacturing customers are increasingly viewing service management and service logistics as a differentiating factor in setting themselves apart from their competitors. After building an effective service supply chain over the years they are now using this as a vehicle for service differentiation. In an increasingly complex operating environment, centralised supply chain management is a hot topic in most of our customers’ boardrooms and now is a high priority as a core part of business.’

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