Tag: #asmaintained

How OEMs Can Service Products Sold Through Indirect Sales Channels

Imagine you are an Original Equipment Manufacturer (OEM) who designs and manufactures fantastic products. You sell these products through a combination of direct and indirect sales channels. But because you don’t control the end-customer relationship, you don’t know how to best ‘serve’ products in the field. In other words, you have limited visibility into where your products are, in what state they’re in, and how they are being used. This reduced visibility impairs you in managing service costs, growing service revenue, and driving customer satisfaction. Let me tell you how you can regain control over your installed base.

Establishing a digital thread

A couple of years back, a premium brand of energy control systems sold its products based on a sell-and-forget model. That model had become the default modus operandi because:

  • The business sold a substantial volume of units through indirect sales channels
  • The company had a legacy of product leadership

This sell-and-forget model caused two major issues:

  1. OEM perspective – the margin contribution of product sales was insufficient to achieve the brand’s EBIT target. Tapping into the margin of services would make It possible to meet and exceed that target.
  2. Customer perspective – the new generation of products was getting more complex. Product owners became more dependent on OEM knowledge and services to sustain the product, to protect the investment.

To mitigate both internal and external challenges, the OEM changed Its model to sell-and-service. Historically, the OEM had access to the as-designed and as-built. Through its transformation journey, it established an as-maintained. In effect, the OEM created a digital thread spanning factory and field.

Indirect sales

You may have noticed a (deliberate) omission in the digital thread above. Namely the as-sold. When an OEM sells products via the indirect sales channel, another legal/commercial entity controls the sales process. This entity will ‘own’ the customer relationship. It will know where the products are, in what state they are in, and how they are being used.

The fact that another legal commercial entity controls the sales process does not mean the OEM is at a loss. Far from that. The product bears the OEM logo. It is the value promise of the product that prompts a user to buy it. Who is better at explaining what the product can do and how to install, operate and maintain the product? Yes, the OEM. The OEM owns the product relationship because it knows how to sustain the product.

Sustaining modern products

When we look at the build of modern-day products, we see that every product engineered post-year 2000 has a digital component next to its mechanical and electrical parts. To sustain a contemporary product, one will need three types of skills.

The OEM as the creator of the product may be the most knowledgeable party to sustain the product on all three levels. Where we see third-party actors becoming competitors on the mechanical and electrical plane, the digital component remains the ‘home turf’ for the OEM. This is where we will focus on re-establishing the thread.

Re-establishing the thread

In the B2C world, maybe the most evocative example is the iPhone. Every phone requires a digital activation. This allows Apple to build a product relationship regardless of sales channel. Through this product relationship, Apple knows where Its products are, in what state they’re in and how they are being used. Apple uses this information to exert control over the product and service lifecycle.

Car maintenance is another example where the product relationship is more determinative than the customer relationship. When you need service for your car, the service provider will ask for your license plate number. The as-built, as-sold, and as-maintained are all linked to your license plate. When the customer relationship changes, the product-related digital thread remains constant. It’s the information in the digital thread that enables control over the product and service lifecycle. Control over items like maintenance intervals, PM-kits, troubleshooting, engineering changes, recalls, consumables, calibration values and software upgrades. All these service lifecycle activities cater to the longevity of the car, and thus the original value proposition of the OEM.

Redefining value creation

When an OEM is dependent on indirect sales channels to push products into the field, what can the OEM do with the data and control obtained through the product relationship?

  • Threat: The OEM claims the data and uses it to bypass the commercial relationship. If dealers/resellers don’t get their cut, they will stop selling the product.
  • Opportunity: The data value is shared to augment the commercial relationship. The data is used to create new revenue/value streams beyond the capabilities of each of the standalone entities.

A similar redefinition of value needs to be negotiated with the product owner. An OEM can’t simply grab product data. When Xerox invented remote monitoring for copiers in 1997, owners blocked the outgoing port. Procurement wanted to have control over the purchasing of toners and drums over premium-priced OEM consumables. This example shows that if product data represents a value, the OEM should give something in return.

OEM, it’s your brand

As the OEM you design and manufacture fantastic products. When in the field, they have your logo on them. Product owners will judge your brand on how you’ve organized your service delivery. If you’re dependent on an indirect sales channel to sell and service your products, you can leverage the product relationship to augment the commercial relationship. The tools to build a digital thread are there.

To learn more about establishing a digital thread for field service, read Understanding the Digital Thread & the Role of Service in the Asset Lifecycle.

This article is published on Field Service Digital and PTC Blog.

Digital Thread: How the Service Bill of Materials Drives System of Record Across the Platform

“We’ve defined ERP as the system of record for our installed base”. This a phrase we hear quite often. Is it a smart choice, and what are the consequences of this choice? When you are in the business of managing the service lifecycle of an installed base, we believe you should consider an alternative approach to system of record.

This blog is part 2 in a series of three.

Limitations of ERP

ERP is often a solid choice for the system of record for many data objects. But lesser so for products, equipment and assets that have left the building. When products hit the field and start their operational lifecycle, those products become a handle for a lot of contextual usage data. Think in terms of how is the product being used, how is it being maintained, and what touch points have we had with the product?

Bill of Materials lifecycle

Let us paint a picture of the lifecycle of the Bill of Materials (BoM). In the design phase of a product, engineering will create an engineering BoM. In the build phase, manufacturing will pull the latest revision of the engineering BoM and use it as a template to manufacture a batch of x units. All those units have the same as-built. If we use a configurator in the sales process, the as-sold may differ from the as-built. So far the information we have captured is product specific.

Post-point-of-sales, when the unit leaves the building and the customer starts using the product, the unit becomes unique. Though the engineering team may have had a specific use profile in mind when designing the product, in real life, customers use the product within (or outside) a bandwidth of the product specifications. Tracking how customers maintain and operate the product thus becomes essential to keep the product running. Being in the operational lifecycle of a product we’ll refer to the BoM as as-maintained or as-operated.

Service lifecycle management (SLM), fit for purpose

If we have to name one single reason why any OEM should revisit their ERP installed base system of record paradigm, it is total product lifecycle cost.

For mission-critical assets, the lifetime Opex is a multiple of product expenditure Capex. Thus, if you want to make a valuable impact on the users/buyers of your products, you need to focus on the service lifecycle.

The SLM asset record is fit for purpose. SLM connects as-engineered, as-built, as-sold, and as-maintained. In part 1 of this series, we explained how the Service-BoM sets the standard of maintenance, underpinning the value promise of product uptime and sustenance. PLM, ERP, CRM, and FSM all add data to the digital thread of the product. SLM, being on the receiving end, defines the data master for products in the field.

Enterprise data architect

Knowing that it takes both product and usage-specific data attributes to keep products running, we’d like to better understand why we’ve defined ERP as the system of record for our installed base. Is this a dogmatic, pragmatic, or conscious decision?

In the decision-making process for enterprise software, there are two factions. The business persona and the IT persona. Both weigh decisions along different (internal) metrics. Though it may seem obvious to abandon the ERP mantra from a business perspective, IT may have sufficient counterarguments not to do so.

This is where we can/should call on the help of the enterprise data architect. The enterprise data architect is key to any system of record conversation. What is primary, and what is secondary? How does data flow from one business area to the next? Does any function own data or is every function contributing data to an enterprise pool of data? The enterprise architect will be able to weigh the arguments and weigh the value of data beyond the individual functions in an organization.

Value of Asset Data

Knowing that the value of asset data is only getting bigger and bigger, we believe we are at an interesting point in time to create a digital thread of data. Focused on keeping the world running. Using the Service-BoM as a pivot. Using SLM as a system of record.

In part 3 of this series, we’ll focus on value using Service BoM and SLM data to drive cross and upsell. Teaser: when you exert a lot of effort in designing, building, and selling products, how much effort do you want to put into generating margin contribution off your installed base?

This article is published on Field Service Digital and PTC Blog.

Digital Thread: How the Service Bill of Materials Links Engineering to Service

When we embark on a digital transformation journey in the after-sales domain, where does the process start? With the sale of the product? Commissioning of the product? First service call? We believe the foundation for the design of your service delivery processes starts in engineering.

This blog is part 1 in a series of three.

The creation of the service manual

When Engineering designs a product, they have an intended use profile in mind. That use profile defines wear-and-tear. Subsequently, the maintenance engineering function will define mitigating strategies to maintain the output specifications of the product and to sustain/prolong its lifecycle. The results are typically captured in the service manual and the Service Bill of Materials (BoM).

The golden standard of service

In a recent engagement with a prospect of ours, we asked to see the service manual of a medium-complex product to scope the service delivery business processes. Our premise: we may upsell on the service manual and promise higher value, but when we deliver less, product continuity and lifecycle may be at risk. As such, the service manual can be seen as the golden standard of service delivery.

In the 165 page pdf-document, we found a wealth of information on what to do, when to do it, and how to do it. Bill-of-materials, serviceable parts, PM-frequencies and kits, recommended consumables and spare parts, installation parameters, calibration values, and MTBF rates. We got enthusiastic. If somebody in engineering created this document, how does it ‘flow’ to after-sales? What system of record does after-sales use to be able to act upon the information in the service manual?

Digital thread

In the last decade, we’ve seen a lot of digitization initiatives driving the transformation agenda. We’ve also seen that a lot of digital data is still created and collected in silos. Engineering is digitizing product lifecycle management (PLM), manufacturing is pursuing Computer-aided manufacturing (CAD), sales are rolling out customer relationship management (CRM) and service is reshaping field service management (FSM). But how do they link to one another? Isn’t the overarching value promise of digitization the sharing of data leading to 1+1=3?

If your organization is in the business of designing, manufacturing, selling, and servicing products, then all those functions are connected through a digital thread. The carrier of the thread is the product itself. Starting as an as-engineered and subsequently transitioning into an as-built, as-sold, and as-maintained. In each stage of the lifecycle, additional information is added to the thread. Zooming out, each function will look at the digital thread through a lens to increase the value proposition.

Design for service

In our engagement with the above-mentioned prospect, we were curious how much design-for-service thought was put into the engineering phase and how that information would shape the design of the service delivery processes. Though the wealth in 165 pages of the service manual was phenomenal, the service organization had not yet invested in processes to receive the engineering baton.

The opening paragraph of the service manual provided a great narrative to introduce the baton. “Congratulations on your purchase. To protect your investment and get maximum return, we’ve defined some handles for good husbandry. This manual contains the instructions to guarantee the nominal output over its technical lifecycle”. In other words, the service manual defines the golden standard of maintenance to underpin the value promise of the product sale[1].

What Engineering documented in the 165-page service manual can be condensed in the following picture. In the first column, we find the Service-BoM. The Service-BoM is a subset of the Engineering/Manufacturing BoM. It contains only those parts that are serviceable. The manual pre-empts what skills are required to perform that serviceable activity. Can it be done by the customer, does it require a skilled technician or should the part be swapped in the field to be repaired in a depot/repair center?

With the above information from maintenance engineering, service delivery has a great blueprint defining what output its business processes should deliver. Analogously, service sales has an anchor to model cross and upsell offerings for customers having needs beyond the baseline described in the service manual.

Design for improvement

The service manual also serves another very important purpose; improvement. Improvement in two directions. Engineering giving handles to service and service giving feedback to engineering. As an illustration, I’ll use the mean time between failures (MTBF) column in the above table.

When Engineering designs a product, they typically have an idea of the lifecycle/MTBF of used components. Those values initially are theoretical numbers. Call them Plan. When the product hits the field in larger numbers, empirical values will trickle in. Call them Actual. When Actual is within a narrow margin of Plan, we say this is expected behavior. When it falls outside the margin, we call it an outlier. Understanding the root cause of the delta between Plan and Actual will enable you to drive improvement by process design.

  • Maybe the product was not installed properly
  • Maybe the product was not used as intended
  • Maybe engineering was wrong
  • Maybe service delivery was not in line with the service manual
  • Maybe the customer pushed out a preventive maintenance cycle
  • Maybe non-approved spares have been used

Actionable Service-BoM

What started as a trivial ask “can you share the service manual of a medium complex product” resulted in a pivotal conversation bridging engineering and service. The service manual is no longer a static 165-page pdf-document sitting in a knowledge repository. It is now an actionable document driving improvement and value in both the service and engineering domains.

[1] When selling products with a transfer-of-title, the risk of maintaining the product transfers to the buyer. Thus, the buyer becomes responsible to mitigate that risk in order to continue receiving the outcome/value of the product. The buyer may purchase maintenance services from OEM or choose differently. Read further in part 3 of this Digital Thread series.

This article is published on Field Service Digital and PTC Blog Site.